Bitcoin (BTC) is showing signs of a potential rebound following a sharp sell-off that rocked the entire cryptocurrency market. Analysts are pointing to a combination of technical indicators and historical patterns as reasons to remain optimistic about the digital asset’s future performance.
In particular, crypto analyst by the pseudonym El crypto prof, in an X post on August 20 pointed out that the recent Bitcoin sell-off has pushed the Relative Strength Index (RSI) to its lowest level in over 20 months, indicating a potential oversold condition.
The analyst noted that Bitcoin’s price had reached a crucial support line that had previously acted as a resistance for nearly a year. What’s particularly noteworthy is the historical correlation between BTC’s RSI dipping below 30 and subsequent price movements.
According to the analyst, each time the RSI has fallen below this threshold, Bitcoin’s price has surged between 28% and an impressive 60% in the aftermath.
“BTC marks the lowest RSI in over 20 months on the daily chart and at the same time hits the support line that was resistance for almost a year. Each time the RSI has been <30, the price of $BTC has risen between 28% and 60% afterward. No reason to be bearish,” he said.
The RSI is a momentum oscillator that measures the speed and change of price movements.
Bitcoin’s next move after correction
Following the recent correction in Bitcoin’s value, during which the asset revisited the $25,000 mark, investors and traders may take solace in this pattern, as it implies that the present market conditions might be conducive to a substantial upward price surge.
In the midst of this recent correction, analysts have advised investors to monitor the support zone around $25,000. Meanwhile, the prevailing consensus suggests that Bitcoin is likely to experience a future rally, driven by factors such as the potential approval of a spot Bitcoin Exchange-Traded Fund (ETF) and the impending halving event.
Notably, the market was unsettled by a series of incidents, including news of Elon Musk’s SpaceX company purportedly selling its Bitcoin holdings. This decision followed reports of the space company taking a write-down of $373 million. Nevertheless, the exact timing of this sell-off remains uncertain.
Meanwhile, Bitcoin is also experiencing a decline in crucial on-chain metrics. For instance, as per a report by Finbold, the monthly trading volume of Bitcoin on major cryptocurrency exchanges has recently dropped to its lowest level in the past five years.
Bitcoin price analysis
Bitcoin has managed to regain the $26,000 position and is trading at $26,171, exhibiting daily gains of just under 1%. However, on the weekly chart, Bitcoin’s value has dropped by more than 10%.
A summary of the asset’s technical analysis obtained from TradingView suggests a ‘sell’ sentiment score of 14, which is in line with the 13 from the moving averages. Oscillators are indicating a ‘buy’ sentiment score of 6.
It’s important to note that apart from the historical chart pattern, the value of Bitcoin is also susceptible to a range of factors, including macroeconomic trends and regulatory developments.
