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Breaking News: Fed Holds Interest Rates Steady, Bitcoin Awaits Trend Reversal Above $27,000
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Breaking News: Fed Holds Interest Rates Steady, Bitcoin Awaits Trend Reversal Above $27,000
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Overbought Or Ready To Rip? Bitcoin Daily RSI Reaches Explosive Levels

Tony "The Bull" by Tony "The Bull"
8 months ago
in All, BTC
Reading Time: 3 mins read

Bitcoin price is showing signs of getting overheated on daily timeframes using the Relative Strength Index (RSI). The tool, typically used to spot overbought conditions, is at one of its highest levels ever historically.

However, an elevated RSI reading in BTCUSD is deceiving, leading to some of the most dramatic moves ever on the cryptocurrency’s price chart. Here is a closer look at what happens when Bitcoin price action gets this hot.

Bitcoin RSI Reaches Highest Level Since Early 2021

After breaching above $20,000, onlookers are wondering if a possible bottom is in for Bitcoin, but remain skeptical after such a long, arduous downtrend.

Bears have good reason to expect a pullback: Bitcoin has become extremely overbought according to the Relative Strength Index. In fact, the top cryptocurrency is more overbought than at any other point during the entire bear trend.

Related Reading: Why A Morning Star Reversal Could Awaken A Monster Bitcoin Rally

Bulls, on the other hand, could be ready to push prices higher. In the past, the RSI has only reached such an elevated level – a reading of 90 or above – during the most intense bullish movements of recent years.

BTCUSD_2023-01-18_14-13-23

Elevated RSI tends to only happen during bull markets | BTCUSD on TradingView.com

Why Crypto Could Be Ready To Rip Higher Once Again

Bearish investors and traders might be quick to claim that this time is different, considering the Fed raising interest rates, the backdrop of war and recession, and more. But bulls have much more data on their side, and momentum at their backs.

In fact, bulls have the entire history of BTCUSD price action to prove that the Relative Strength Index reaching such highs have led to the greatest sustained gains in crypto.

BTCUSD_2023-01-18_14-22-35

Bull markets are characterized by recurring phases of extreme RSI readings. Bull markets also end at such extremes, but typically only after at least a series of three waves. Bear market peaks, throughout the entire lifetime of BTCUSD price action, always fail to reach such highly elevated RSI.

The Relative Strength Index was created by developed by J. Welles Wilder – who also developed the Parabolic SAR, Average Directional Index, and Average True. The technical tool measures the speed of the change of price movements.

Related Reading: “Parabolic” Signal That Triggered Past Bitcoin Bull Runs Reappears

Although readings above 70 and below 30 typically represent overbought or oversold conditions, a reading of 90 only occurs with an extremely fast and strong move. Such fast and strong moves tend to appear more often in a bull market than a bear market.

Cryptocurrencies can remain notoriously overbought during periods of FOMO. Is that exactly what we’ve seen in Bitcoin recently? And will the number one cryptocurrency by market cap rip higher, or ultimately see a rejection here due to such overbought conditions?

Follow @TonySpilotroBTC on Twitter or join the TonyTradesBTC Telegram for exclusive daily market insights and technical analysis education. Please note: Content is educational and should not be considered investment advice. Featured image from iStockPhoto, Charts from TradingView.com
Tags: bitcoinbtcbtcusdBTCUSDTcryptoRelative Strength IndexRSI
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Tony "The Bull"

Tony "The Bull"

Tony is the “always-on” Editorial Director and Head of Research at NewsBTC, leading a talented team of writers and editors across several different global time zones. Tony is also the founder of CoinChartist.io – an educational website focused on crypto trading. Partners include Elliott Wave International, TradingView, and more. Tony’s background includes an extensive, award-winning media production career and over fifteen years of publishing operations and management. In the past, Tony has founded several media websites and his content has been read billions of times. Past clients include the BBC, Fidelity, and many others. Tony "The Bull" is a level 3 CMT student (passed level 1 & 2), technical analyst, Bitcoin supporter, and avid speculator. He owns a python named Satoshi. Tony longs for the day when money is separated from the state. Tony is deeply fascinated by core market principles such as Elliott Wave Theory as they tie into mathematics like Fibonacci ratios. Market timing though DeMark indicators, Ichimoku, Gann tools, or Hurst Cycle Theory are also of key interest. Tony provides completely original content driven by exclusive, independent research. For more insights and education from Tony, check out his free TonyTradesBTC Telegram channel. Follow @TonyTheBullBTC on Twitter. You can also follow @CoinChartist_io on Twitter and subscribe on YouTube.

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