Bitcoin price in free fall And the cryptocurrency community is in a panic. The high-risk and speculative asset class lives up to the infamous volatility and selling seems unstoppable.
At some point, all assets become oversold and recovery begins. After the recent sell-off, the weekly RSI for BTCUSD has reached an oversold level in the entire history of price action, including two lows in the bear market.
Bitcoin Selling Sets Record For Most Oversold Weekly RSI Ever
Bitcoin price exploited today Less than $22,000 per coin And prices are fast approaching the peak of 2017. It has already pushed several altcoins, including Ethereum, below the peak of the last bull market in an unprecedented move for the crypto market.
Panic properly followed it. The frantic attempt to withdraw coins as quickly as possible while there was still value left prompted several major exchanges to stop withdrawals and better assess the situation. Selling pressure also pushed to weekly push RSI to the most oversold levels in history since Bitcoin began trading.
Related reading | Bitcoin Drops to 18-Month Lows, Has the Market Seen the Worst?
The Relative Strength Index is a commonly used momentum oscillator that was first developed by J. Wells Wilder Jr. in the 1970s. Wilder is also the creator of the Average True Range, Average Trend Indicator, and SAR EQ. It is used to measure when an asset becomes overbought or oversold.
With BTCUSD historically oversold on the weekly time frames using the RSI, what exactly could this mean, and what might happen next?
BTCUSD weekly RSI is the most oversold ever | Source: BTCUSD on TradingView.com
Comparing the current crypto crash with previous bear market bottoms
a eye examination From the weekly chart, BTCUSD puts the RSI immediately below the 30 minimum, at the same level as the two previous troughs in the bear market. Readings below the 30 minimum are considered oversold. In contrast, readings above 70 are considered overbought.
More accurate readings for 2015 and 2018 Bear Market Bottoms are 28.41 and 28.72, respectively. The current reading for BTCUSD is below 28, marking the lowest point ever on the weekly time frames.
Related reading | Bitcoin Bear Market Comparison Says It’s Almost Bull Season
Although this is a sign that hindsight could mark a significant bottom in the cryptocurrency, since the RSI depends on momentum, the downside may continue until the momentum runs out. Price can also frequently test the area similar to how Bitcoin has regularly shown readings of hyperbolic price action over its history.
Buyers at these prices may want to look for the RSI swing rejection setting accordingly Wilder’s methodology. Much like during previous bear markets, the setup involves waiting for the RSI to reach oversold levels. The rest of the strategy involves watching the RSI return above the threshold and continue above the threshold during the next correction. After the RSI makes a higher high, a buy signal is generated.
Taking a position now does not mean it is safe | Source: BTCUSD on TradingView.com
Even then, bulls are not completely safe in their positions. If previous bear markets indicate what to expect, there is a 50/50 chance of Double bottom formation With a bullish RSI divergence.
In 2015, a second bear market bottom occurred, marking a slightly lower low after a full 200 days. The RSI hit a high low, indicating that selling momentum was too weak for the price action, and the most explosive bullish trend in history followed.
Was this the bottom signal the bulls had been waiting for?
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Featured image from iStockPhoto, Charts from TradingView.com