Share this article
Bitcoin Looks Overbought but Analysts Play Down Drop Fears
Bitcoin's rally looks overstretched, according to a technical indicator, but short-term price consolidation looks more likely than a drop, say analysts.
Updated Sep 14, 2021, 9:37 a.m. Published Jul 29, 2020, 12:40 p.m.
Make us preferred on Google
With bitcoin rising to its highest level in 11 months this week, some investors are beginning to worry that the cryptocurrency is overbought and may be due for notable price drop.
STORY CONTINUES BELOW
Don't miss another story.Subscribe to the Crypto Daybook Americas Newsletter today. See all newsletters
But analysts suggest that's an overreaction.
- Bitcoin’s price rose to $11,319 on Monday, the highest level since August 2019, according to CoinDesk’s Bitcoin Price Index.
- At time of writing, the cryptocurrency is trading near $11,100, representing a 18% gain from lows near $9,400 observed a week ago.
- The sudden rally has pushed the 14-day relative strength index (RSI) above 80.00.
- A measurement of over 70.00 is considered overbought, meaning the bullish move is now overstretched.
- Asim Ahmad, co-chief investment officer at London-based Eterna Capital, said that an above-70 RSI does not necessarily imply an impending major price slide.
- More likely it indicates that the bullish move is overstretched and vulnerable to consolidation or a minor retracement at worst, Ahmad said.
- Lennard Neo, head of research at Stack funds, explained the RSI can stay inflated for longer periods in a strongly trending market, adding that other indicators are showing strong buying momentum.
- The RSI is based on price and remained elevated during the previous bulls runs.
Consolidation ahead?
- Bitcoin remained bid and rose 160% in the second quarter of 2019 (above left) despite the RSI printing highs above 70.00 several times during the three-month period.
- A similar pattern was observed during the bull market frenzy of 2017 (above right).
- Back to summer 2020 and the overbought measurement on the RSI may keep the cryptocurrency hovering around $11,000 for some time. Support is seen around $10,500.
- Rotation of money out of the DeFi space and traditional markets and into bitcoin would create momentum for the cryptocurrency, said Neo.
- Prices could rise quickly toward $12,000 in the short-term if the U.S. Federal Reserve signals higher tolerance for inflation. That could yield another sell-off for the greenback and send gold above the $2,000 mark.
- Bitcoin still remains vulnerable to a sell-off in equities, as was seen during the wider markets crash in March, according to Joel Kruger, a currency strategist at LMAX Digital.
Also read: How Real Is Bitcoin’s Rally? 8 Interpretations of Bitcoin’s Massive Surge
More For You
Pudgy Penguins is building a multi-vertical consumer IP platform — combining phygital products, games, NFTs and PENGU to monetize culture at scale.
What to know:
Pudgy Penguins is emerging as one of the strongest NFT-native brands of this cycle, shifting from speculative “digital luxury goods” into a multi-vertical consumer IP platform. Its strategy is to acquire users through mainstream channels first; toys, retail partnerships and viral media, then onboard them into Web3 through games, NFTs and the PENGU token.
The ecosystem now spans phygital products (> $13M retail sales and >1M units sold), games and experiences (Pudgy Party surpassed 500k downloads in two weeks), and a widely distributed token (airdropped to 6M+ wallets). While the market is currently pricing Pudgy at a premium relative to traditional IP peers, sustained success depends on execution across retail expansion, gaming adoption and deeper token utility.
More For You
U.S. listed bitcoin, ether ETFs bleed nearly $1 billion in a day
U.S.-listed spot bitcoin and ether ETFs saw one of their worst combined outflow days of 2026 as falling prices, rising volatility and macro uncertainty pushed investors to cut exposure.
What to know:
- U.S.-listed spot bitcoin and ether ETFs saw nearly $1 billion in outflows in a single session, as crypto prices tumbled and risk appetite faded.
- Bitcoin dropped below $85,000 and briefly neared $81,000, while ether fell more than 7%, prompting heavy redemptions from major ETFs run by BlackRock, Fidelity and Grayscale.
- Analysts say the synchronized ETF selling reflects institutions cutting overall crypto exposure amid rising volatility, hawkish Federal Reserve expectations and forced unwinding of leveraged positions, though some see the move as a leverage shakeout rather than the start of a bear market.
