The price of Bitcoin continues to climb, leaving very few withdrawal opportunities so far for those who haven’t bought below $20,000.
The price action on BTCUSD over the weekly timeframe, according to the Relative Strength Index, has reached a critical line that separates the bear market from the bull market. Any higher, and the crypto could experience a real breakout. We’ll take a look.
What Relative Strength Tells Us About Cryptocurrencies
The Relative Strength Index is a popular technical indicator used in cryptocurrencies, originally created by J. Welles Wilder in the 1970s.
The tool measures momentum through “the speed and magnitude of price movements,” according to Wikipedia. Readings above 70 may indicate overbought conditions and a drop below 30 suggests an oversold market.
In rare cases, the RSI will remain overheated, illustrating a particularly powerful trend. Most of the time, it remains between 30 and 70 as prices consolidate or move sideways.
On higher timeframes, going over the middle zone of the RSI can send lower timeframes through the roof – or through the ground.
In the case of the BTCUSD weekly charts, the RSI suggests that this exact line in the sand currently separates what could be a full breakout in a bull market – or a severe rejection.
Exceeding this level on the RSI led to bullish rallies | BTCUSD on TradingView.com
Bitcoin hits critical line in sand between bear and bull market
Looking back throughout Bitcoin’s history, pushing above around 55-56 on the RSI has led to extraordinarily bullish moves in the past. Falling below leads to the deadliest declines and bear markets.
Worse still, as the weekly BTCUSD sits at the key trigger level, the rejection has led to sharp moves. In 2014, a rejection from there kicked off the second phase of the bear market. In 2015, a bull market attempt was harshly rejected to return to bear market lows.
The latest example in 2020 of a bull market being dismissed and combined with the outbreak of COVID, resulted in the Black Thursday meltdown. Given the significance of the level and the fact that some of the worst rejections occurred when the RSI hit such a reading, it’s no surprise that investors remain skeptical and cautious.
If Bitcoin can rise above the current Relative Strength Index zone, the bull market could resume in the blink of an eye. Currently, BTCUSD daily charts are showing an extremely high RSI, well within overbought conditions. However, the extended phases of the daily RSI levels support bullish market behavior and could indicate that the weekly RSI and other higher timeframes may also approach overbought levels at some point in the future.
Beware of short circuit #Bitcoins when the RSI is this high. pic.twitter.com/YHus8lR6dG
— Tony “The Bull” (@tonythebullBTC) January 17, 2023
