Technical Indicator Signals That Crypto Markets are Highly Overbought

The crypto markets appear to have found some stability at their current prices, as many altcoins have been able to continue climbing higher while Bitcoin further solidifies its footing at just under $5,300. The market’s recent price action has been widely viewed as being bullish by analysts and traders alike – many of whom believe that the markets have found a bottom and that the persisting “Crypto Winter” has come to an end.

Despite the bullish buzz surrounding the markets, a technical indicator that has empirically been accurate is now flashing a signal that cryptocurrencies are highly overbought, which could mean that a significant retrace is imminent.

Crypto Markets Continue to Inch Upwards Following Recent Surge

At the time of writing, the overall cryptocurrency market capitalization is $182.8 billion, which is up from its daily lows of $179.4 billion.

Over the past few weeks, the markets have surged in value, climbing from one-month lows of $130 billion to highs of $186 billion. This surge was brought about when Bitcoin began an upwards ascent from the upper-$3,000 region to the lower-$5,000 region.

Many cryptocurrencies have been able to incur massive gains during the market’s recent climb, with Bitcoin Cash surging from monthly lows of under $130 to highs of nearly $340. Litecoin has also posted some large gains that harken back to the days of the parabolic bull run, jumping from roughly $55 to highs of just under $100, before settling to its current price of just below $90.

These price gains have brought about a significant amount of trading volume, with the crypto market’s 24-hour volume skyrocketing from approximately $30 billion in early-March to a high of nearly $90 billion in early-April.

Technical Indicator Spells Trouble for the Markets

Although the recent gains have sparked confidence amongst many traders and analysts alike, the GTI Global Strength Indicator is currently signaling that the markets are highly overbought. It is also important to note that the last time this indicator signaled that the markets were this overbought was in early-January of 2018 when the markets had reached the peak of their parabolic ascent.

Bloomberg, who first reported about the GTI Global Strength Indicator running into highly oversold territory, notes that the indicator is tracking the Bloomberg Galaxy Crypto Index, which is mainly composed of Bitcoin, Ethereum, and XRP – the three largest cryptocurrencies.

Bloomberg Intelligence analyst, Mike McGlone, spoke about this technical indicator, explaining that the declining volume the markets have faced over the past week or so may be part of the reason that the current crypto rally could be fleeting.

“A highly speculative market rallying on declining volume is not healthy. Typically you need good, strong volume and transactions to indicate an enduring trend. Bulls appear to be grasping at straws or what best fits their more emotional less rational views, positions. The emotional enthusiasm the past week appears too extreme,” he explained.

As the week drags on the strength and endurance of the current rally will likely grow more apparent to cryptocurrency investors and analysts.

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