Bitcoin (BTC) is showing signs of a potential recovery after a sharp sell-off that shook the entire cryptocurrency market. Analysts point to a combination of technical indicators and historical patterns as reasons to remain optimistic about the future performance of the crypto-asset. Here are the details…
Analyst points to the RSI indicator for Bitcoin
Specifically, crypto analyst nicknamed El crypto prof pointed out in an X post on Aug. 20 that the recent Bitcoin sale pushed the Relative Strength Index (RSI) to its lowest level in more than 20 months, signaling a potential oversold condition. The analyst noted that the price of Bitcoin had previously reached a key support line that had acted as resistance for about a year. Particularly noteworthy is the historical correlation between BTC’s RSI falling below 30 and subsequent price movements.
#Bitcoin $BTC marks the lowest RSI in over 20 months on the daily chart and at the same time hits the support line that was resistance for almost a year.
Each time the RSI has been <30, the price of $BTC has risen between 28% and 60% afterwards.
No reason to be bearish. pic.twitter.com/gl3Y4Emy1C
— 𝕄𝕠𝕦𝕤𝕥𝕒𝕔ⓗ𝕖 🧲 (@el_crypto_prof) August 20, 2023
According to the analyst, each time the RSI fell below this threshold, the price of Bitcoin increased by an impressive 28% to 60%. “BTC is marking a 20-month low on the daily chart and also hitting the support line, which has been resistance for almost a year. Every time the RSI is less than 30, the BTC price subsequently rose between 28% and 60%. “There is no reason to go into decline,” he said. RSI is a momentum oscillator that measures the speed and change of price movements.
BTC’s next move after correction
After the recent correction in Bitcoin’s value, where the asset revisits the $25,000 level, investors and traders can find solace in this pattern as it hints that current market conditions may be conducive to a significant price increase. In the midst of this latest correction, analysts advised traders to watch the support zone around $25,000. Meanwhile, the prevailing consensus suggests that Bitcoin could rally in the future, driven by factors such as the potential approval of a spot Bitcoin Exchange Traded Fund (ETF) and the upcoming halving event.
In particular, a series of events made the market uneasy, including Elon Musk’s claim that SpaceX company was selling Bitcoin assets. This decision came after reports that the space company lost $373 million in value. However, the exact timing of this sale remains unclear. Meanwhile, Bitcoin is also experiencing a drop in key on-chain metrics. For example, monthly trading volume of Bitcoin on major cryptocurrency exchanges has dropped to the lowest level in the past five years, according to a report. Bitcoin managed to regain the $26,000 level and traded at $26.171, gaining just under 1% daily. However, on the weekly chart, the value of Bitcoin has dropped more than 10%.
