A recent volatile run-up in the Ethereum and Bitcoin markets has exceeded their value into “overbought” regions, as per Relative Strength Indicator (RSI).
In retrospect, the RSI is a momentum indicator that measures the magnitude of recent price changes in an asset to determine its overbought or oversold conditions. Displayed as an oscillator, it can have a reading anywhere between 0 and 100, with 30-70 serving as a neutral area. Traders perceive RSI above 70 as overbought—and below 30 as oversold.
They further treat an overbought RSI as their cue for a potential trend reversal or a price pullback.
Bitcoin’s RSI following its jump from $3,858 in March to above $41,000 in January has surged to 89.48 on its daily chart. Meanwhile, the same reading for Ethereum is at 89.36 after its $1,335 percent move within the same period.
Ethereum trades near its yearly high as its RSI signals topping out. Source: ETHUSD on TradingView.com
Ethereum trades near its yearly high as its RSI signals topping out. Source: ETHUSD on TradingView.com
Defying Traditions
Typically, the overextended rallies in both the assets have prompted some analysts to see deeper price corrections ahead, with some even forecasting a 50 percent drop from their respective session tops. Nevertheless, one analyst believes that traders should not sell their Bitcoin and Ethereum based on RSI warnings.
Koroush AK, who successfully predicted …
