The Market Ear analyst recently pointed out that Bitcoin is currently showing overbought conditions based on two technical indicators, RSI and 200 MA. There may be a significant correction in Bitcoin in the near future.
Summary:
Bitcoin broke through $64,000, but Matrixport founder believes March is fragile and Bitcoin may experience a 15% pullback after the halving.
Background:
JPMorgan: Bitcoin may fall to $42,000 after the April halving, mining difficulty tsunami?
Table of Contents:
Analyst: Bitcoin is currently heavily overbought
BTC significantly exceeds the moving average
Bitcoin’s correlation with the Federal Reserve and inflation weakens
This week, the price of Bitcoin surged from around $51,000 to $64,000, a 22.9% increase. With the continuous inflow of funds into the US Bitcoin spot ETF and the upcoming Bitcoin halving in April, the day of breaking the historical high seems to be approaching.
However, despite the market’s surprise at this rise, some analysts have expressed concerns about a pullback and bearishness.
Further reading:
BTC skyrocketing winner! Michael Saylor’s net worth increased by £700 million in three days, MicroStrategy stock price up 40%
Analyst: Bitcoin is currently heavily overbought
According to a research report released by The Market Ear on the 29th, analysts pointed out that Bitcoin’s RSI (Relative Strength Index) in the past two weeks has reached 88, a level that Bitcoin has never seen before in the $60,000 price range. This may indicate that Bitcoin is heavily overbought.
Source: Refinitiv
However, if we further observe the chart, when Bitcoin reached its peak in the bull market in 2021, the RSI showed a “gradual contraction” condition. Usually, the real decline will only appear some time after the high point.
Therefore, relying solely on the overbought condition indicated by the RSI to judge the short-term trend may have a delay.
Note 1: RSI (Relative Strength Index) is a technical indicator used to measure market strength and weakness. The larger the value, the hotter the market, and the smaller the value, the colder the market. When the value exceeds 70, it indicates that the asset has reached an overbought stage.
Note 2: Overbought means that the price of an asset has reached a level that is not supported by fundamental factors. It usually occurs after a sharp price increase in a short period of time, which also means that the asset price is likely to decline subsequently.
Another indicator is the 200 MA (200-day moving average). The Market Ear pointed out that Bitcoin’s current trading price has exceeded the 200 MA by about 70%.
Looking back at history, in three similar situations that occurred in 2021, two of them were followed by a significant market decline.
Source: Refinitiv
Bitcoin’s correlation with the Federal Reserve, inflation, and other factors has weakened
It is worth mentioning that the analysts also pointed out that Bitcoin’s correlation with many fundamental factors has been disrupted. These factors include:
The monetary policy of the Federal Reserve;
The depreciation of the US dollar;
Hedging tools;
Inflation.
Currently, the market seems to ignore these fundamental factors. Data shows that the inflow of funds into financial products, including Bitcoin spot ETFs, has surged in the past few weeks.
Source: JPM
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