A key technical analysis indicator is showing that Bitcoin (BTC) is now in extreme oversold territory following last week’s steep selloff.
On August 18, Bitcoin’s price fell 10% to as low as $25,000 U.S. in a 24-hour period, causing cryptocurrency traders to lose about $1 billion U.S. as a result.
Bitcoin is currently trading right around $26,000 U.S. and its 14-day relative strength index (RSI) is now flashing, indicating that the digital currency is in oversold territory.
A slump in stocks and surging bond yields have pushed Bitcoin’s price below 30 on the RSI, its lowest level since the Covid-19 crash of March 2020.
The RSI is a momentum indicator that ranges between 0 and 100 and shows an asset’s recent price movement relative to its average price movement over a specific period, typically 14 days.
A reading below 30 reflects oversold conditions, implying that the price has dropped too quickly relative to its recent average. Meanwhile, a reading above 70 indicates overbought conditions.
An oversold RSI reading means that an asset’s price has dropped too fast and could signal that negative sentiment is growing towards Bitcoin.
There is a debate raging on social media about whether Bitcoin’s price will continue to decline in coming weeks or if it will reverse higher following last week’s sudden drop.
Some cryptocurrency analysts see Bitcoin’s price falling to $24,500 U.S. in the near-term while others expect the price to retest the $30,000 U.S. level.
Despite the recent pullback, Bitcoin’s price is still up 57% on the year, outpacing gains in all the major stock indices.
