Bitcoin Looks Most Oversold Since Covid Crash, Key Indicator Suggests

A technical analysis indicator shows extreme oversold conditions in bitcoin as surging bond yields weigh over risk assets, including cryptocurrencies.

Have you ever wondered when is the right time to buy or sell Bitcoin? Well, the current market conditions might just give us a clue! According to a key indicator, Bitcoin is currently the most oversold it has been since the Covid crash. This is an interesting development worth paying attention to if you're an investor or trader in the world of cryptocurrencies.

Understanding the Indicator

Bitcoin's 14-day relative strength index (RSI) has dropped well below 30, indicating oversold conditions. The indicator has dropped to its lowest since the coronavirus-induced crash of March 2020.

The RSI is a momentum indicator ranging between 0 to 100 that shows the asset's recent price movement relative to its average price movement over a specific period, usually 14 days.

A reading below 30 reflects oversold conditions, implying that the price has dropped too quickly relative to its recent average. Meanwhile, a reading above 70 indicates overbought conditions.

Now, here's where it gets interesting. Many people mistakenly believe that oversold and overbought readings are signals of an impending reversal in the market. But that's not the case. An oversold RSI reading simply means that prices have dropped too quickly, while an overbought reading indicates that prices have rallied fast.

So what does this latest oversold reading on the RSI mean for Bitcoin? It actually suggests that the bearish momentum is strengthening. As the saying goes, indicators can stay oversold for longer than dip buyers can stay solvent.

An Expert's Perspective

According to Alex Kuptsikevich, senior market analyst at FxPro, Bitcoin's trend has shifted to bearish territory. He pointed out, "Bitcoin closed the [last] week with a notable drop below its 200-week and 200-day moving averages, signaling a shift to a bearish trend. From current levels near $26,000, the next area of decline appears to be the last pivot area at $24,700."

So, if you're considering entering the Bitcoin market, it might be worth waiting for signs of a reversal before diving in. After all, taking into account the oversold conditions and the expert's analysis, caution is advised.

Bitcoin is currently trading at $26,000, having dropped over 10% last week. This decline can be attributed to the surge in the yield on the 10-year U.S. inflation-indexed security, which hit the highest level since 2009.

As with any investment decision, it is important to do your own research and consider all factors before making any moves. Keep a close eye on Bitcoin's RSI and market trends to make informed decisions and stay ahead in the ever-evolving world of cryptocurrencies.