Bitcoin [BTC] has enjoyed a fantastic three months, with the price shooting up by close to a whopping 200 percent, followed by the market cap crossing $200 billion. As early investors and holders rejoiced at the prospect of a continuing bull run, some cryptocurrency analysts have taken a closer look at the integral parameters of the world’s largest cryptocurrency.
Alex Kruger, a popular economist and trader, touched upon the overbought/oversold detail of Bitcoin and delved into whether BTC was heading into the ‘overbought’ direction, which usually signifies the arrival of bullish atmosphere. He tweeted,
“Is $BTC overbought?
Since 2014, $BTC has traded fully outside the Keltner Channel (2.5/20) with RSI >90 on NINE occasions.”
The Keltner channels are volatility-based envelopes set above and below an exponential moving average, in this case, for Bitcoin’s MA. They are a trend following indicator used to identify reversals with channel breakouts and channel direction and the fact that BTC traded only a few times outside the channel indicated that the Bitcoin ecosystem was overbought. One BTC enthusiast, @macaconomy, claimed,
“Something that will one day be worth a whole galaxy (much more than 21 million galaxies in the universe but only 21 million $BTC) is being sold for US$ 10,000.00.”
Kruger further added that out of the nine times that BTC traded outside with an RSI greater than 90, six times the graph retraced to the open pricing in a matter of just 20 days, whereas the average was 10 days. One out of nine times, it took 79 days, while twice in May 2017 the graph never retraced. The economist also elucidated,
“Avg max run-up in following 20 days stands at 25%, while avg max drawdown stands at 12.5%. Analysis excludes contiguous days outside the channel. Jun/23 represents the 10th occasion since 2014.”
Some Bitcoin enthusiasts opined that the overbought scenario might cause a long term correction in BTC’s price because of the lack of catalysts for the present value hike. The most optimistic take on the price climate was that if Bitcoin climbs at the rate it has been climbing for the past three months, then $20,000 will be a very real milestone.
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