Bitcoin BTC/USD was trading flat during Monday’s 24-hour trading session on declining volume after rallying 4% on Sunday to close just above the $28,000 mark amid Credit Suisse failure and the bank's subsequent acquisition.
The sideways consolidation was needed because Bitcoin’s relative strength index is measuring in at about 72%, which puts the crypto in overbought territory.
RSI is an indicator technical traders use to measure bullish and bearish price momentum. RSI levels can range between 0 and 100, with levels between 30 and 70 generally considered to be healthy.
When a stock’s RSI falls below the 30% level, it's considered to be oversold. When a stock enters oversold territory, it indicates the securities price no longer reflects the asset's true value, which can signal a reversal to the upside is in the cards.
When a stock’s RSI rises above the 70% area, it is considered to be overbought. When a stock enters overbought territory, it signals the asset’s price is elevated compared to its intrinsic value, which can signal a reversal to the downside is on the horizon.
RSI is best used when combined with other signals and patterns on a stock chart because stocks can remain in oversold and overbought territory for an extended period of time before reversing.
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The Bitcoin Chart: Between March 10 and the high-of-day on Sunday and Monday, Bitcoin has surged over 46%, which drove its RSI into overbought territory. The sideways consolidation is healthy because it’s helping to lower Bitcoin’s RSI.
- Bitcoin is trading in an uptrend, making a consistent series of higher highs and higher lows. The crypto’s most recent higher high was printed on Sunday and Monday just above $28,000 and the most recent higher low was formed at the $23.931 mark on March 15.
- The sideways consolidation on Monday was taking place near the top of Sunday’s trading range, which has formed Bitcoin into an inside bar pattern. The inside bar leans bullish because Bitcoin was trading higher before forming the pattern. Traders can watch for the crypto to break up or down from Sunday’s range on higher-than-average volume to gauge future direction.
- Bitcoin has resistance above at $28,690 and $31,418 and support below at $25,772 and $25.288.
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