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Bitcoin’s (BTC) market correction might soon be over and the crypto could resume its uptrend. This is based on the technical indicated called the relative strength index (RSI).
The relative strength index is an indicator used to gauge momentum as well as overbought and oversold conditions, according to Coindesk. At the moment, the 14-week RSI has dropped to 53, a level that marked the end of previous corrective pullbacks during the 2016-2017 bull run.
Bitcoin’s price has suffered a massive 35 percent price decline from $64,801 to around $42,000. Most pin the blame on the recent decline to Elon Musk’s series of comments on Twitter such as the Tesla announcement on halting BTC payments for its cars and Musk’s one-word response to a Twitter post which started some crypto investors to speculate that Tesla might have already sold its BTC.
The tweets caused some retail investors to panic sell their BTC holdings. On top of that, whales have started moving their funds out of Bitcoin, leading to the steep decline of its price.
“However, the bull market looks intact, with the cryptocurrency still up 365% year on year and evidence of long-term investors buying the dip,” Coindesk wrote. “Coupled with the weekly RSI hovering at historically strong support, that suggests the cryptocurrency may soon resume its uptrend.”
The RSI nearing 53 had been a reliable indicator signaling the end of past corrections. “Bitcoin saw at least four significant corrections during the 2016-2017 bull run that ended with the weekly RSI near 53.00,” the publication added.
Meanwhile, the daily RSI is now below 30, which is a signal that Bitcoin is now oversold. This could mean that another rally might just be around the corner.
“From a technical point of view, the price is finding some support from the 200-day exponential moving average, plus other momentum indicators such as the RSI, which shows that the price is somewhat oversold,” eToro crypto-asset analyst Simon Peters said.
“This means there is a possibility of buyers now stepping in to push prices up and, as we have seen before, investors waiting on the sidelines are already using the sell-off we have seen to invest in crypto assets, taking advantage of the volatility,” he added.
