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After plunging to $6,800 on Friday, Bitcoin (BTC) has been subject to some reprieve; the cryptocurrency now trades at $7,300, up some 8-odd percent from the bottom. While this bounce is somewhat positive for bulls, especially considering the historical importance of the high-$6,000s, a key indicator suggests that there may be more pain to come for the market.
Related Reading: Crypto Tidbits: Bitcoin Dives Under $8,000, Fidelity Bags Trust License, SEC Takes Second Look at ETF
Bitcoin May Have Further to Drop, RSI Suggests
Analyst Byzantine General recently noted that the Relative Strength Index (RSI) — an oscillating indicator that tracks if an asset is overbought, oversold, or somewhere in between by factoring in the “magnitude of recent price changes” — for the one-day Bitcoin chart has hit 25, meaning slightly oversold.
The significance of this: Bitcoin’s one-day RSI rarely drops below 30, and normally hits 20 when it does. With this precedent in place, there is a high likelihood that BTC will continue to head lower from current price levels.
https://twitter.com/ByzGeneral/status/1198311966617559040
But… But… the Bottom is In
While Byzantine’s analysis of the RSI indicator suggests there is more pain to come, there is a confluence of evidence supporting the idea that Bitcoin found a local, and maybe ultimate, bottom in and around $6,700.
Firstly, as reported by NewsBTC previously, Scott “The Wolf of All Streets” Melker noted that during yesterday’s plunge to $6,800, BTC’s four-hour RSI hit 6.5, which is the lowest ever on Coinbase’s market and the lowest it has been in 2019. As the RSI oscillates between 0 and 100, a reading of 6.5, which is extremely rare, implies that the asset being analyzed is extremely oversold, and due to bounce as a result.
4 Hour RSI is presently 6.5, which matches the lowest that it has EVER BEEN on Coinbase and the lowest it has been this year. Buying some Bitcoin. pic.twitter.com/1DceRyuBsC
— The Wolf Of All Streets (@scottmelker) November 22, 2019
That’s not all. Dave the Wave, an analyst who called the drop to $6,700 months and months ago, said that there is a confluence of technical factors that suggest a long-term bottom was put in at $6,700. This confluence includes but isn’t limited to the three-year moving average—which currently sits in the low-$6,000s—is where BTC historically has found support in early bull markets and the fact that the cryptocurrency has bounced off the 0.5 Fibonacci Retracement level of the $3,200 to $13,800 range, implying bottoming price action.
Related Reading: Legendary Bitcoin Short Seller Says To Watch For Base To Form Before Buying
Featured Image from Shutterstock
