to take its week-to-date losses to over 10% after falling another 1% on Friday, Bitcoin ,B T cIt is now oversold, according to the widely-followed 14-day Relative Strength Index (RSI) indicator. BTC/USD was last changing hands at $20,100, following a session low above $19,500, with its RSI just above 28.
An RSI score of less than 30 is widely seen as indicating that market conditions are oversold in the short term. Meanwhile, an RSI score above 70 is seen as a signal that the market position has turned overbought.
Last time of bitcoin RSI fell below 30, immediately following the collapse of cryptocurrency exchange ftx Back in November. of bitcoin The RSI entering the oversold region is often a key indicator that the recent sharp decline may be coming to an end and a period of consolidation at lower price levels may be on the way.
Bitcoin’s RSI is falling into oversold territory, following a so-called “bearish divergence” earlier in the year. This is where the RSI starts posting lower highs despite the bullish trend in the price.
In the most recent instance, bitcoin’s RSI reached a high of 86 at 13.th In January when BTC/USD was breaking above $20,000, before posting consecutive lower highs with the bitcoin price rising above $25,000 during the next few weeks.
Some traders view the bearish divergence of the RSI with the underlying price as an indicator that the bullish price is losing momentum. And that seems to have certainly been the case over the past few weeks.
200DMA, the real price proposition is the key support
Bitcoin’s surge above the $20,000 level on Friday shows that appetite remains strong in the market to defend the key 200-day moving average and realistic price levels in the $19,700-800 area.
For context, realized price is an on-chain metric calculated by taking the average price at the time each circulating bitcoin was last minted – a proxy for the average price paid by the market for each bitcoin. Is.
Both levels are widely followed by crypto and traditional asset investors alike. A decisive break above these levels, as happened earlier in the year, is seen as a strong signal that the market’s near-term momentum has shifted in a positive direction.
Conversely, failure to break the 200DMA (or actual price) can be seen as a signal that the market is “not ready” to embrace a new bullish trend, and aggressive reversals are often observed. It failed to cross the 200DMA level in the case of bitcoin at the end of March 2022.
Macro headwinds remain
Despite Friday’s strong bounce off key support, price risks are tilted to the downside as macro risks escalate. US equity markets fell this week due to an aggressive selloff in bank stocks as two crypto/tech start-ups linked US banks (silvergate And Silicon Valley Bank) ripped out.
Both eventually succumbed to bank runs with depositors (including many crypto and tech firms) worrying about the strength of their balance sheets. The Silicon Valley bank’s woes were compounded earlier this week by a failed attempt to raise capital that drew attention to the dire state of its bond portfolio.
Transition risks for other small and medium-sized US banks remain high and this could keep risk appetite in the stock and crypto markets going for the next week.
Friday’s Not as hot as the scary US jobs report And troubles in the bank sector have hit the markets Wind Back Fed Makes Tough Betwith a 25 bps rate hike from US Central Bank At the end of this month now once again the base case estimate of the market.
But next week the February US CPI report is released. If this shows that the resurgence in price pressures seen in January continues into February, markets may once again brace for a rate hike of 50 bps later this month as well as a potentially higher terminal rate .
This would be toxic to risk assets at a time when concerns are growing about the impact of the Fed’s tightening efforts on the banking sector, and could worsen the contagion already being seen.
risk is tilted to the downside
One area of particular concern for crypto is usdc The reserves of stablecoin issuer Circle, a small portion of which were held at Silicon Valley Bank. At the moment, it looks like all deposits will be completed.
But if there is any sense that the US banking crisis caused Circle to lose some of its reserves, it could spell trouble for crypto as investors rush to sell their USDC.
For all of the above reasons, as well as the ongoing jitters about the ongoing crypto crackdown by US regulators (the NY attorney general argued that ether is a security this week), the risk is tilted to the downside. If bitcoin loses its grip on the 200DMA and the actual price, a sharp decline to the support-resistance-resistance $18,200-400 area could be in store.