According to a key indicator in the crypto market, cryptocurrency Bitcoin is on the verge of a spirited rally. Bitcoin’s 14-week relative strength index (RSI), a critical momentum indicator, attracts attention. Accordingly, it recently crossed an important threshold, indicating the possibility of an uptrend. This bullish signal, if realized, will demonstrate the FOMO (fear of missing out) phases observed during previous Bitcoin bull runs.
Importance of RSI for Bitcoin
The Relative Strength Index (RSI), developed by J. Welles Wilder, has attracted attention recently. Accordingly, it is an important tool for assessing the speed and magnitude of price fluctuations. It works on a scale from zero to 100. It also uses a default period of 14 days for its calculations. However, investors often use longer periods, such as 14 weeks or 14 months, to measure long-term market momentum. This is also important for cryptocurrency Bitcoin investors.
An RSI reading above 70 is often misinterpreted as an indication of overbought conditions. Accordingly, it indicates an imminent downward trend. Contrary to popular belief, a reading above 70 is noteworthy in the field of technical analysis, especially over long time frames. Accordingly, it indicates strong bullish momentum and the potential for sustained price rallies. A historical parallel can be drawn with the Bitcoin BTC bull markets of 2019 and 2020, where RSI readings above 70 heralded significant volatility.
Long-term upside potential
It’s important to remember a quote from Wall Street here. Accordingly, “markets can remain irrational for longer than you think and the metrics indicate.” The quote highlights that overbought conditions in the crypto market can persist for a long time, defying conventional wisdom. Essentially, an RSI above 70, especially on long time frames, indicates that the asset may have the power to embark on a sustained upward journey, as seen in previous Bitcoin bull markets.
On the other hand, there is a significant change for Bitcoin. Accordingly, there is a remarkable change in the Bitcoin options and futures markets. For the first time since March, open interest in options has outpaced open interest in futures. Accordingly, when we look at it as Kriptokoin.com, this situation exhibited an interesting dynamic in the Bitcoin trading arena. This trend was reversed for a short time. However, the options market has shown strong expansion since July. But the futures market has largely stagnated. It is emphasized that institutional interest lies behind this trend.
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