Bitcoin prices previously showed extreme strength ahead of the debut of the first spot ETFs. That strength has since waned, leading to a 20% correction in BTCUSD.
However, a popular technical indicator that measures momentum could indicate a strong continuation of the uptrend, but only if a certain level is breached. Keep reading to learn more about the Relative Strength Index and how the top cryptocurrency behaves once the market reaches an ‘overbought’ level.
Bitcoin is approaching “overbought” and why this is not a bad thing
The Relative Strength Index is an instrument that measures momentum and signals when a market is ‘overbought’ or ‘oversold’. When a financial asset reaches such conditions, it often means that the trend is about to change.
In Bitcoin and other cryptocurrencies, the weekly RSI is often a signal that the asset is entering its most powerful phase. For example, Bitcoin rose above 70 in October 2023, and just weeks later it rose more than 60% to 2024 local highs.
Now the 1W BTCUSD charts are showing an RSI reading just below 70, indicating a possible close above the overbought level. If bulls can keep the top cryptocurrency by market cap above $43,650, the weekly RSI should close above the threshold.
The average move is 107% | BTCUSD on TradingView.com
BTCUSD Historical 1W Relative Strength Data
Historical data might shed some light on what might happen if the weekly was published Relative Strength Index closes above 70 as expected.
Over the past decade, Bitcoin has seen an RSI of 1W close above 70 a total of 13 times. This happened eight times in 2016 and 2017, twice in 2019 and once in 2020 and 2021. One more case occurred in 2023.
Out of 13 times, the average gain after the RSI closed above 70 until the peak of the move was 107%. The biggest rally took place in 2020, with a return of more than 400%. The smallest rally took place in 2016 and saw only a 20% gain.
After removing the largest and smallest outliers, the average drops to about 61%. This could mean that Bitcoin could cause a move between 61 and 107% on average.
A 61% gain takes BTCUSD back to just under $68,000, which is a new all-time high, while a 107% move sets a new record closer to $90,000 per coin. The cryptocurrency may also be working on a bull flag pattern, with a target of around $77,000.
The 75% target is within historical averages | BTCUSD on TradingView.com
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