Bitcoin Exhibits Strong Oversold Signal Amidst Rising Bond Yields

Bitcoin’s recent price decline has triggered a technical indicator suggesting that the cryptocurrency is experiencing extreme oversold conditions. The 14-day relative strength index (RSI) for Bitcoin has fallen significantly below the 30-mark, a threshold indicating oversold conditions. This RSI reading is the lowest since the market crash prompted by the COVID-19 pandemic in March 2020.


The RSI is a widely used momentum indicator that ranges between 0 and 100, reflecting an asset’s recent price movement relative to its average movement over a specified period, usually 14 days. When the RSI drops below 30, it signifies that the asset’s price has plummeted too rapidly in relation to its recent average. Conversely, an RSI reading above 70 points to overbought conditions, suggesting that the price has rallied excessively.


It’s crucial to dispel a common misconception among cryptocurrency enthusiasts and novice traders. Oversold and overbought RSI readings are not reliable signals of imminent bullish or bearish reversals. An oversold reading merely indicates that prices have depreciated rapidly, while an overbought reading implies a swift price increase.


The current RSI reading below 30 indicates the strengthening of bearish momentum rather than predicting an impending bullish reversal. As the saying goes, indicators can remain in oversold territory for an extended period, potentially longer than dip buyers can maintain their financial solvency.


According to Alex Kuptsikevich, senior market analyst at FxPro, Bitcoin’s trend is displaying bearish characteristics. Kuptsikevich noted that Bitcoin recently closed a week with a significant drop below its 200-week and 200-day moving averages, a development signaling a shift towards a bearish trend. From the current trading levels near $26,000, Kuptsikevich identifies the next potential area of decline at $24,700.


As of the latest update, Bitcoin is trading at approximately $26,000. Over the past week, prices experienced a decline exceeding 10%, a trend influenced by the rising yield on the 10-year U.S. inflation-indexed security, which reached nearly 2%. This yield surge marks its highest level since 2009, indicating the impact of rising bond yields on various asset classes, including cryptocurrencies.

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