Bitcoin’s RSI Signals Oversold Condition

Bitcoin’s price fell below $90,000 early Tuesday, a 28% decline from its record high of over $126,000 reached in early March. This drop has triggered an oversold signal on the 14-day relative strength index (RSI), a widely followed measure of price momentum, dipping below 30. An oversold RSI typically indicates that a downtrend has been strong enough to warrant a pause or potential rebound.

However, an oversold RSI reading shouldn’t be taken at face value. The indicator can remain in this territory for extended periods, often longer than buyers can sustain their positions. Many experienced traders interpret an oversold RSI as a sign of strong downward momentum, rather than an immediate trend reversal.

Traders should look for confirmation through price action. Emerging support levels and candlestick patterns such as Doji or candles with long lower wicks suggesting easing selling pressure, would validate the oversold RSI and point to a possible bounce.

The last time the RSI fell below 30 in late February, Bitcoin traded under $80,000. This marked a slowdown in the downtrend, followed by a bottom near $75,000 in early April. A similar move may be possible now.

The RSI’s wide tracking by traders can sometimes create a self-fulfilling prophecy, where trading based on the indicator influences its impact. CoinDesk analyst and Chartered Market Technician Omkar Godbole provided this technical analysis.

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Disclaimer: What is written here is not investment advice. Cryptocurrency investments are high-risk investments. Every investment decision is under the individual’s own responsibility.