In a day marked by a dizzying rise, the price of Bitcoin (BTC) has reached levels not seen since December 2021, hovering around $50,000.
On February 12, 2024, the ecosystem surrounding the digital currency is fueled by a wave of optimism a month after spot Bitcoin ETFs were approved in the United States, a move that has channeled significant capital flow.
But in the midst of this euphoria A technical indicator emerges that urges caution: Bitcoin's Relative Strength Index (RSI). indicates an overbought zone on both the 4-hour and daily and weekly time frames (the three most commonly used time frames in the market). trade medium and long term) exceed the threshold of 70 points.
In the following graphic from TradingViewFor example, You can see the price of Bitcoin (above) and the RSI (below).. The candles are in daily timing:
But what does this indicator really mean and what does it mean to be in this so-called “overbought zone”? The RSI, as CriptoNoticias has explained in previous publications, is a technical analysis tool used by investors to measure the speed and change of an asset's price movements. An RSI above 70, fluctuating between 0 and 100, indicates that an asset may be overbought, indicating thisThe price could be higher than the fundamentals warrant and therefore it could be on the verge of a correction.
The overbought zone is nothing more than a warning signal. In the current context, where enthusiasm seems to know no bounds, this indicator serves as a cautious reminder that prices do not simply rise. The divergence between Bitcoin's rising price and its RSI suggests that investors (especially those trading in the short term) should proceed cautiously despite the strong inflow of fresh money and bullish expectations.
Also The SOPR indicator is showing signs that a correction is imminent. The CryptoQuant analysis platform public in your X account, the perspective of one of your users – specialized in technical analysis – who recognizes:
“Based on the current chart where the SOPR index is calculated as a 30-day moving average greater than 1, it can be interpreted that Bitcoin holders (smart money) take profits and sell. If we analyze historical data, Bitcoin's current position is not considered an optimal entry point for buying. Given the high probability shown by the current SOPR index, there is suspicion that a price correction could occur at any time from this point onwards.
Woominkyu, market analyst.
It should be made clear that the SOPR (Ratio of production profits spent) provides an overview of the overall profitability of the coins sold by comparing the price at the time of sale with the price at the time of purchase of said coins. This indicator is useful for understanding market behavior and investor psychology. For example, A consistently high SOPR can indicate a successful and possibly overextended market., which could lead to profit-taking and a price correction. This is exactly what can be seen in the following SOPR graphic shared by CryptoQuant:
This situation offers a moment of reflection. Are we at the beginning of a correction or will the upward momentum continue despite technical warnings? History has taught us that the Bitcoin market is unpredictable, but also that those who have knowledge and a strong understanding of its indicators can ride its waves with greater confidence.
At the time of this publication it was The RSI in overbought territory provides a necessary counterpoint to the prevailing FOMOwhich calls for assessment and prudence.