• According to The Market Ear, Bitcoin’s RSI warns short-term traders who want to chase the price rise to be cautious.
  • The RSI reading that is overbought indicates the possibility of a temporary correction in the price.

BTC Price Index and Live Chart – CoinDesk”>(BTC), the leading cryptocurrency by market value, has gained over 40% in four weeks and is trading just 12% short of its record high near $69,000.

In such a market environment, short-term traders, speculators and those who missed out on the initial rally often jump in head first, using leveraged products, like futures, to maximize their gains and compensate for sitting initially on the sidelines.

According to The Market Ear, if you are a short-term trader, you may want to take into consideration the latest information that suggests chasing a rally right now could be risky.

“Bitcoin (14-day) RSI at 88.” The Market Ear’s analysts said that they had never seen RSI at this level of overboughtness AND bitcoin trading levels at such high absolute values.

Analysts added, “Pursuing it now looks like a late trade.”

RSI is a momentum index developed by J. Welles Wilder that measures price changes over a specified period of time, typically 14 days or fourteen weeks.

A reading over 70 indicates that the asset has been steadily rising in price for a while or may have risen too quickly and will likely correct downwards soon.

The RSI is a measure of overbought condition. The Market Ear (Refinitiv).

The RSI has never been this high before, and neither has the bitcoin price. The indicator reached a peak between 65 and75 when bitcoin was above $60,000 for the first time in 2021 or November 2021.

Bitcoin’s current value in relation to the RSI gives credibility to the overbought indicator, and caution is advised for speculators who are looking to enter the market at the current rate.

RSI, however, is not the Holy Grail. The RSI can stay above 70 for a long time when the markets are on a strong upward trend. Newton’s Law states that “an object in motion will remain in motion at the same speed, in the same direction, unless it is acted on by an unbalanced power.”

For long-term investors, the overbought reading has little significance. Their strategy is to invest and hold to achieve long-term growth. Investors tend to ignore short-term fluctuations and focus instead on the bigger picture.

Analysts believe that bitcoin’s future is bright, thanks to halving which cuts supply by 50% every 4 years and Wall street’s recent embrace spot Bitcoin ETFs. According to analysts, bitcoin’s price could reach $120,000 or higher by September 2025.

Parikshit Miishra is the editor.