No crypto investor will have noticed that in recent months the price of bitcoin (BTC) has plummeted. Since the peak in November last year, the price of bitcoin is now about 50% lower. A commonly used technical indicator, the Relative Strength Index (RSI), is currently at its lowest point in about two years. According to some, this means good news for the market.
The RSI is often used by traders and investors to determine whether the market is oversold of overbought is. If the RSI gives a signal that the market is oversold then this is a sign for many that the biggest decline may already be over and if the market is overbought it could mean that the rise is coming to an end .
Right now, the RSI on the daily chart shows an extremely low value for bitcoin. Such a value was last seen in March of 2020. At the time, both the crypto– as equity markets in response to the coronavirus pandemic.
Trend reversal imminent?
In March of 2020, the price of bitcoin move back up fairly quickly after the RSI bottomed out. From then on, the price also seemed unstoppable and rose from below $4,000 all the way to around $64,000.
Although an extremely low RSI does not mean that bitcoin is suddenly going to shoot through the roof, it could possibly suggest that a trend reversal is imminent. Based on the RSI, it is not inconceivable that the current price point of bitcoin is the bottom.
Of course, using a technical indicator such as the RSI is not the same as looking into a crystal ball. It only gives a signal about the current state of the market and gives no guarantees at all. Nevertheless, the RSI is considered a valuable tool by many experienced traders and investors.