Bitcoin (BTC) has surged over 40% in the past four weeks, now only 11% away from its all-time high of $69,000. In this extremely bullish market environment, some short-term traders and speculators who missed the early gains often hesitate to use higher-risk leverage products (such as perpetual contracts) to maximize their profits, making up for the missed gains. The risks associated with chasing higher prices may now be quite high.
Technical indicators show that Bitcoin is severely overbought. Analysts from The Market Ear recently pointed out in a report that Bitcoin’s 14-day Relative Strength Index (RSI) has reached 88, a level never seen before at the price level of $60,000. This could mean that Bitcoin is severely overbought.
RSI is a momentum indicator developed by J. Welles Wilder. When the value exceeds 70, it indicates that the asset is in an overbought phase, meaning that the asset price has been continuously rising or rising too fast for a long period of time and a pullback may occur soon. This is a warning worth considering for speculators who want to enter the market at the current price.
An RSI above 80 combined with a price level above $60,000 has never been seen before. The last time Bitcoin traded above $60,000 was in early 2021 and November 2021, but at that time, the peak RSI values ranged from 65 to 75.
On the other hand, the Bitcoin market price has also deviated from the 200 MA by about 70%, and similar extreme situations have occurred three times in 2021, with two of them leading to significant price corrections.
In addition, The Market Ear analysts also pointed out that the correlation between Bitcoin and narratives such as Federal Reserve decisions, US dollar depreciation, and inflation hedging has been broken, with the few clues being the increasing interest of institutional investors in Bitcoin. Data shows that the inflow of funds into financial products, including Bitcoin spot ETFs, has increased rapidly in recent weeks.
In contrast, the holdings of gold ETFs have continued to decline.
