There is a clear sign that bitcoin’s sell-off today may be over-extended.
According to Bitfinex exchange, CoinDesk’s Bitcoin Price Index (BPI) is now at level 26.4 strength; the same level that was last seen in August 2016. Surprisingly, this happened after hitting a 70-day low at 6.133usd
The relative strength index, or RSI, is used for identifying overbought and oversold conditions of an asset by “comparing the magnitude of recent gains and losses over a specified time period to measure speed and change of price.”
When such levels are hit, the indicator suggests price action is approaching a level below the asset’s true value, where a price bounce tends to occur.
BTC/USD seldom hits oversold levels (<30) in a daily time frame, however when it happens, the price indicates legendary and good performance. It was February 6 when the RSI levels went below 30. From then, the price went up from 6,000usd to 11,788usd in just two weeks, a 96% gain.
On August 14, 2016, BTC got an RSI level of above 26 when the price showed 563usd on Bitfinex. Until today, the price of bitcoin didn’t go down. In fact, it increased at 980% rate.
While the oversold indicators bring a signal of downtrend exhaustion, players still want to proceed with caution before celebrating as bitcoin’s daily RSI has gone down to lower levels.
According to Bitfinex data, it was August 18, 2015, that the lowest level was recorded at 16.1 since 2013.