Bitcoin price is back at nearly $ 57,000 and is within $ 10,000 of a new setting, a new all-time high and is back in price discovery mode.
It is also minutes away from re-entering the bullish RSI zone, which has led in the past to peaks in the cryptocurrency cycle and a bear market to follow. Here’s a closer look and what to watch out for.
Bitcoin price prepares aggressive re-entry into RSI ‘bull zone’
Bitcoin price action does not behave like other assets. Its speculative nature helps it follow the technical analysis, but remains very volatile.
But in some cases, when the FOMO starts, even the technical indicators start to behave irrationally. The Relative Strength Index, for example, is an oscillator that tells a trader when an asset is oversold or overbought. The idea is that when a reading is above 70, an asset is overbought and nearing the end of its trend.
Related reading | How 90-year-old market magic predicted Bitcoin’s breakthrough
On shorter time frames this can help find short term highs, but on longer time frames going over 70 tends to signal that the bulls came out in force, and very little will stop them.
Bitcoin is about to reach above 70 on the RSI | Source: BTCUSD Index on TradingView.com
The same monthly calendar also shows another anomaly: The price of Bitcoin has never entered oversold territory according to the monthly RSI.
All of this is happening as the price of Bitcoin and the RSI itself start to rise. build on a parabolic base. All of this behavior suggests that the cycle is not over and that another wave is about to follow.
The trend line separating a bullish and bearish market
A different look at the RSI and a descending trendline, drawn with a dotted line below, could provide a clue as to where the trend will end. Dropping back below a reading of 70 will confirm a bear market is here.
Could BTC top out at the descending RSI trend line? | Source: BTCUSD Index on TradingView.com
The re-entry into the bullish zone should cause bulls to take control on the price of Bitcoin again, but relies on a monthly close above a reading of 70 to ignite the spark.
Going over $ 65,000 to hit a new record this month would do the trick. If this happens, the dish should approximate the highest cryptocurrency by market cap. at $ 80,000 per piece.
Related reading | Bulls Take Back Control of Bitcoin Trend Strength: What to Expect
That would leave very little room between that level and the promised land of $ 100,000 and more – where the coming mania will likely end abruptly, much like the same RSI has shown to occur at the end of every cycle.
Falling below 70 during this cycle will either be a confirmed bear trap this month or the shortest time spent on the bullish zone in Bitcoin’s history – which one is it?
Featured image from iStockPhoto, Charts from TradingView.com