Bitcoin looks most oversold since COVID-19 crash, key indicator suggests
|A technical analysis indicator shows extreme oversold conditions in Bitcoin as surging bond yields weigh over risk assets, including cryptocurrencies.
Bitcoin's 14-day relative strength index (RSI) has dropped well below 30, indicating oversold conditions. The indicator has dropped to its lowest since the coronavirus-induced crash of March 2020.
The RSI is a momentum indicator ranging between 0 to 100 that shows the asset's recent price movement relative to its average price movement over a specific period, usually 14 days.
A reading below 30 reflects oversold conditions, implying that the price has dropped too quickly relative to its recent average. Meanwhile, a reading above 70 indicates overbought conditions.
One of the mistakes that the crypto community on X (formerly Twitter) and most rookie traders make is to consider oversold and overbought readings as advance hints of an impending bullish and bearish reversal.
But that's not the case. An oversold RSI reading means prices have dropped too quickly – that's it, while overbought reading indicates prices have rallied fast.
If anything, the latest below-30 or oversold reading on the RSI is a sign of strengthening bearish momentum. As the old saying goes, indicators can stay oversold longer than dip buyers can stay solvent.
According to Alex Kuptsikevich, senior market analyst at the FxPro, bitcoin's trend has shifted bearish.
"Bitcoin closed the [last] week with a notable drop below its 200-week and 200-day moving averages, signaling a shift to a bearish trend. From current levels near $26,000, the following area of decline appears to be the last pivot area at $24,700," Kuptsikevich said in an email.
The 14-day RSI has dropped to lowest since March 2020. (TradingView/CoinDesk) (TradingView/CoinDesk)
Bitcoin changed hands at $26,000 at press time. Prices fell over 10% last week as the yield on the 10-year U.S. inflation-indexed security nearly rose to 2%, hitting the highest since 2009.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.