Bitcoin (BTC) has risen by over 40% in the past four weeks and is now only 11% away from its all-time high of $69,000.
In this extremely bullish market environment, some short-term traders and speculators who missed the early uptrend often hesitate to use higher-risk leverage products (such as perpetual contracts) to maximize their profits and make up for missed gains. The risks associated with chasing higher prices may now be quite high.
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Technical indicators show that Bitcoin is severely overbought.
The Market Ear analyst recently pointed out in a report that the relative strength index (RSI) of Bitcoin (14 days) has reached 88, the highest RSI value ever seen at the $60,000 price level. This may indicate that Bitcoin is severely overbought.
RSI is a momentum indicator developed by J. Welles Wilder. When the value exceeds 70, it indicates that the asset is in an overbought phase, meaning that the asset price has been continuously rising or rising too quickly for a long period of time, and a correction may occur soon. This is a warning worth considering for speculators who want to enter the market at the current market price.
An RSI above 80 combined with a price level above $60,000 has never been seen before. The last time Bitcoin traded above $60,000 was in early 2021 and November 2021, but at that time, the peak RSI values ranged from 65 to 75.
On the other hand, the Bitcoin market price has also deviated from the 200 MA by about 70%, and similar extreme market conditions have occurred three times in 2021, two of which were followed by significant price corrections.
In addition, The Market Ear analyst also pointed out that the correlation between Bitcoin and narratives such as Federal Reserve decisions, US dollar depreciation, and inflation hedging has been broken, and only a few hints can be seen from the growing interest of institutional investors in Bitcoin. Data shows that the inflow of funds into financial products, including Bitcoin spot ETFs, has rapidly increased in the past few weeks.
In contrast, the holdings of gold ETFs have continued to decline.
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