In the face of escalating bond yields, the cryptocurrency subject of close scrutiny, Bitcoin, has been flagged up by a technical analysis indicator as severely oversold. In technical jargon, this means that Bitcoin’s 14-day relative strength index (RSI) has skidded far below the redline at 30. Such a stark indicator hasn’t breached this limit since the pandemic-precipitated financial plummet that rocked the markets in March 2020.
For those needing a refresher, the RSI is a momentum indicator with a sweep ranging from 0 to 100. It provides an overview of an asset’s recent price movement relative to its average ebb and flow over a fixed period, traditionally set at 14 days. If an RSI dips below 30 as ours here has, it essentially means the price has tanked too swiftly relative to its recent average. Conversely, a reading peaking over 70 suggests overheating.
A common pitfall for new entrants to the crypto treasure hunt on platform X (formerly known as Twitter) and for cryptocurrency trading fledgelings is to misinterpret an oversold or overbought RSI as a clairvoyant signal of a forthcoming reversal in bullish or bearish trends.
But standing up to that claim is the voice of sagacity from senior market analyst at the FxPro, Alex Kuptsikevich, asserting a shift to a bearish trend for Bitcoin. He further clarifies that an oversold RSI carries the sole implication of an overly rapid price downfall, and similarly, the overbought counterpart merely signifies a meteoric rally. In the otherwise wild world of crypto trading, interpreting an oversold indication as a signal of bearish momentum gaining steam would be best advised not as prophecy, but as a word to the wise.
The famous market adage rings true, indicating that an asset can indeed remain oversold longer than a dip buyer can stay afloat. The bearish trend now apparently reigning over Bitcoin follows the cryptocurrency’s noteworthy drop last week. The fall furthers push it beneath its 200-week and 200-day moving rates, another ominous augur of a bearish orientation.
By the time the financial week drew to a close, Bitcoin was in freefall, with the price landing close to the $26,000 mark. The following decline checkpoint looms at $24,700. Simultaneous affliction comes from a 10% price slump last week, while the yield on a 10-year U.S. inflation-indexed security precariously balanced at nearly 2% – the highest point since 2009.