The Bitcoin relative strength index (RSI) on Bitfinex, one of the largest USD to Bitcoin exchanges, is at its lowest point since August 2016. Such a low RSI could indicate that the market is oversold and might be ready for a price rebound, based on past Bitcoin market behavior after RSI hit such low levels.
The RSI was developed by technical analyst Welles Wilder and compares recent price gains and losses over a 14-day period to measure the speed and magnitude of price fluctuations. RSI is considered a momentum oscillator that can be used to measure the strength and weakness of a market, and to determine if the market is overbought or oversold. RSI has been proven to be a good indicator of future price movements.
When RSI is above 70 that indicates a market is overbought/overvalued and it is possibly a good time to sell, and when RSI goes below 30 that indicates a market is oversold/undervalued and it is possibly a good time to buy.
As of this writin,g the RSI for Bitfinex’s BTC to USD market is sitting near 26. It is rare for Bitcoin’s RSI to drop below 30 into oversold territory, the last time it happened in February 2018 Bitcoin’s price rallied 96% from USD 6,000 to nearly USD 12,000.
The last time RSI was as low as it is today (13 June 2018) was 14 August 2016 when Bitcoin was sitting near USD 550. After that Bitcoin rallied for the rest of 2016 and all the way through 2017 to record highs near USD 20,000.
Clearly, there is some precedent for RSI below 30 being an indicator of the bottom of a Bitcoin price crash, and the beginning of a Bitcoin price rally. There is no guarantee that this is the exact bottom of the recent Bitcoin price crash though, as in August 2015, RSI declined all the way to 16 before the market began to rebound.
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