An important technical analysis indicator shows that Bitcoin (BTC), the largest cryptocurrency, has entered the oversold zone due to the pressure exerted by rising bond yields on risky assets, including the cryptocurrency market. Furthermore, the technical outlook indicates that the trend in BTC has turned bearish.
Bitcoin’s RSI Indicator Enters “Oversold” Zone
Bitcoin, the crypto king, has entered the oversold zone as its 14-day Relative Strength Index (RSI) dropped well below 20. With this decline, the indicator has fallen to its lowest level since the March 2020 collapse caused by the Coronavirus (COVID-19) pandemic. RSI is a momentum indicator that measures an asset’s recent price movement compared to its average price movement over a specific period, usually 14 days, on a scale of 0 to 100.
A drop below 30 on the RSI indicator reflects being in the oversold zone, indicating that the price has fallen rapidly compared to its recent average. On the other hand, a rise above 70 indicates being in the overbought zone.
One of the mistakes made by the crypto community on X (formerly known as Twitter), as well as most novice investors, is interpreting the approach of RSI to the oversold or overbought zones as a precursor to a rise or fall. However, the reality is quite different. Being oversold on the RSI simply indicates that the price has fallen rapidly, while being overbought indicates that the price has risen rapidly.
A drop below 30 or entry into the oversold zone by RSI indicates a strengthening of the bearish momentum. The indicator can remain in the oversold zone for much longer than anticipated by bottom buyers.
Bitcoin’s Trend Turns Bearish
Alex Kuptsikevich, a senior market analyst at FxPro, warned that Bitcoin’s trend on the daily time frame has turned from bullish to bearish. In his Bitcoin analysis, Kuptsikevich stated:
Bitcoin signaled a shift to a bearish trend by closing last week with a significant drop below the 200-week and 200-day moving averages.
Kuptsikevich also added that he sees the current levels around $26,000 as a pivot level below the bottom zone at $24,700.
