This is a technical analysis post by CoinDesk analyst and chartered market technician Omkar Godbole.
A key technical indicator shows a signal that marked the slowdown of bitcoin bearish trend in February.
The price of BTC fell below $90,000 early Tuesday, down 28% from the all-time high of over $126,000 reached early last month. With this, the 14-day Relative Strength Index (RSI), a widely followed measure of price momentum, has fallen below 30, indicating an oversold condition. This means that BTC’s current decline has been sharp enough to invite a pause or a possible rebound.
But an oversold RSI should never be taken at face value. The indicator can remain in this territory much longer than buyers can sustain. Many experienced traders view an oversold RSI as a sign of strong downward momentum, rather than an immediate trend reversal.
What really matters is whether the price action confirms the signal. Therefore, traders should look for emerging support levels or candle patterns, such as Doji or candles with long lower wicks, that suggest selling pressure is easing. If they appear, they would validate the oversold RSI and set the stage for a bounce.
The last time the RSI fell below 30 in late February, bitcoin was trading below $80,000. This marked a slowdown in the downtrend, followed by a low near $75,000 in early April. Traders would do well to watch closely for signs of a similar move now.
Because the RSI is so widely followed by traders, this signal can sometimes become a self-fulfilling prophecy, where collective trading actions based on the indicator amplify its effect.
