Bitcoin Is Incredibly Oversold, Say Some Chartists

At this juncture, most investors know that bitcoin and other cryptocurrencies are being taken to task this year. As of midday Thursday, February 5, bitcoin’s seven-day loss was in excess of 22%.

The largest digital currency by market value is probing levels last seen in late 2024. It would need to nearly double to reclaim its all-time high. Understandably, factoids like that have even the most devoted HODLers feeling pensive. Likewise, other market participants are apt to assume now is the time to gloss over ETFs such as the Coinshares Valkyrie Bitcoin Fund (BRRR). However, a different perspective exists.

Indeed, it may be difficult to get excited about BRRR and related ETFs at a time when more than $1 trillion in cryptocurrency market value evaporated in a week. For risk-tolerant market participants, though, history may provide some positive clues about what’s next for bitcoin.

Bitcoin Has Rarely Been This Oversold

Investors considering direct ownership of bitcoin or an ETF like BRRR should take a quick look at the digital currency’s relative strength index (RSI). RSI measures a security’s overbought or oversold conditions. These days, bitcoin is oversold to a historically staggering extent.

As CoinDesk reports, bitcoin’s RSI currently resides at 17. It’s only been that low twice before: at the nadir of the 2018 bear market and during the 2020 bear market caused by the COVID pandemic. Interestingly, both of those dour scenarios gave way to massive upside.

“On both of those previous occasions, bitcoin rewarded buyers with violent upside moves. In 2018, BTC more than quadrupled over the ensuing 8 months from $3,150 to $13,800. In 2020, bitcoin soared from $3,900 to a cycle high of $65,000 just more than one year later,” according to CoinDesk.

Obviously, history isn’t guaranteed to repeat. In financial markets, however, it often does. At the very least, it often rhymes, as the old saying goes. That implies that even some rhyming this time around would benefit bitcoin and ETFs like BRRR. For now, there is work to be done.

“Thursday’s market carnage liquidated more than $1.5 billion across crypto derivatives. While the temptation might be to sell when an asset is weak, astute traders will see the oversold territories as an opportunity — especially as liquidity between $70,000 and $80,000 has effectively been wiped out,” added CoinDesk.

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