Bitcoin (BTC) is currently oversold according to the widely followed 14-day Relative Strength Index (RSI) indicator after falling another 1% on Friday and losing more than 10% since the start of the week. . BTC/USD last traded in the $20,100’s and fell to the $19,500’s early in the session, with the RSI just above 28.
An RSI score below 30 is widely considered to indicate that market conditions are oversold in the short term. On the other hand, an RSI score above 70 is considered to indicate that the market conditions are overbought.
The last time Bitcoin’s RSI fell below 30 was shortly after the collapse of crypto exchange FTX in November. Bitcoin RSI entering oversold territory is a leading indication that the recent sharp decline may be coming to an end and a period of consolidation at lower price levels may be upon us. It is often an indicator.
It was after the so-called “bearish divergence” earlier this year when Bitcoin’s RSI fell into oversold territory. This is where the RSI begins to hit lower highs despite the price trending upwards.
In the most recent example, Bitcoin’s RSI hit a new all-time high of 86 on the 13th.th BTC/USD was above $20,000 in January before hitting continuous low highs as the price of Bitcoin climbed above $25,000 over the next few weeks.
Some traders see the bearish divergence of the RSI from the underlying price as an indicator of weakening bullish price momentum. And that certainly seems to have been the case in the last few weeks.
200DMA, critical support for realized price offers
Bitcoin’s rebound above the $20,000 level on Friday suggests that the market’s desire to sustain the key 200-day MA and realized price levels between $19,700 and $800 remains strong.
For reference, realized price is an on-chain metric, calculated by taking the average price of each Bitcoin in circulation at the time of its last move. This is a proxy for the average price paid by the market for each Bitcoin.
Both levels are widely followed by both cryptocurrency and traditional asset investors. A significant break above these levels, as happened earlier in the year, is seen as a strong sign of a positive shift in market short-term momentum.
Conversely, not exceeding 200 DMA (or the realized price) can be taken as an indication that the market is not “ready” to embark on a new bullish trend, and we often see positive reversals. Such was the case with Bitcoin, which failed to exceed 200DMA in late March 2022.
Macro headwinds continue
Despite Friday’s strong rebound from major support, price risks are still tipping to the downside as macro risks rise.The U.S. stock market this week saw his two banks in the U.S. linked to cryptocurrency/tech startups (Silvergate and Silicon Valley Bank) Implosion.
Depositors, including many cryptocurrency and tech companies, were worried about the strength of their balance sheets, and both ended up in bank runs. Silicon Valley Bank’s woes were exacerbated by a failed fundraising attempt earlier this week, drawing attention to the dire state of its bond portfolio.
Contagion risk for other small and medium-sized US banks remains high, which could sustain risk appetite in the stock and cryptocurrency markets next week.
Friday US jobs data not as hot as feared Troubles in the banking sector have pushed the market to Rewind Fed Tightening Betwith a 25 bps rate hike from central bank of the united states Market base case assumptions again later this month.
However, the US CPI report for February will be released next week. If this indicates that the resurgence of price pressure seen in January is continuing into his February, the market will likely see his 50 bps rate hike and possibly terminal rate hikes again later this month. You may be forced to weave in.
Amid growing concerns about the impact of Federal Reserve (Fed) monetary tightening on the banking sector, this could be detrimental to risk assets and exacerbate the contagion already seen.
Risks Still Tilt Downwards
One area of particular concern with cryptocurrencies is USDC stablecoin issuer Circle’s reserves, some of which were held in Silicon Valley banks. At the moment it seems all deposits are done in full.
However, any indication that Circle has lost part of its reserves due to the ongoing US banking crisis could lead to a cryptocurrency crisis as investors rush to sell USDC.
For all of the above reasons, and continued concerns about US regulators’ ongoing crackdown on cryptocurrencies (NY Attorney General argued Ether is a security this week), risks remain downside. leaning toward If Bitcoin loses grip on his 200 DMA and realized price, he could be facing a quick drop to the $18,200-$400 area as he turns from support to resistance.
