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Bitcoin ranks as the third most oversold in history, according to one indicator, with a potential for significant price recovery ahead.
The Relative Strength Index (RSI), a widely recognized technical trading tool, has dropped to 17. This figure is only lower than the bear market bottom in 2018 and the 2020 Covid crash.
Bitcoin’s RSI has only been recorded at lower levels on two prior occasions (TradingView)
Key points:
- Bitcoin’s RSI has decreased to 17 amid the panic selling observed in recent weeks.
- This level of oversold indication has only been surpassed twice in bitcoin’s recent history — during the 2018 bear market bottom and the 2020 Covid crash.
- In both of these instances, BTC provided investors with substantial gains in the following months.
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Bitcoin dropped to approximately $65,000 on Thursday as a result of a series of liquidations fueled by a strongly negative sentiment, yet one technical indicator implies the cryptocurrency may be poised for not just a recovery, but a significant upward movement.
On Thursday, Bitcoin’s daily Relative Strength Index (RSI), a commonly utilized momentum oscillator that evaluates whether an asset is oversold or overbought, registered at 17.6 (on a scale of 0-100) — indicating heavily oversold conditions that were only surpassed in the modern era of BTC by the Covid crash in 2020, which recorded a low of 15.6, and the 2018 market bottom, which fell to 9.5.
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On both previous occasions, bitcoin rewarded investors with significant upward movements. In 2018, BTC surged more than four times over the following 8 months, rising from $3,150 to $13,800. In 2020, bitcoin climbed from $3,900 to a peak of $65,000 just over a year later.
Thursday’s market turmoil resulted in the liquidation of over $1.5 billion across cryptocurrency derivatives. While the inclination may be to sell when an asset is underperforming, savvy traders may view the oversold conditions as a chance — particularly as liquidity between $70,000 and $80,000 has effectively been eliminated.
