Key Points
- Bitcoin’s 4-hour RSI dipped to levels unseen since last August, causing a significant market drop.
- Despite the drop, Bitcoin managed to bounce back by over 8%, reclaiming a key support level.
Bitcoin’s 4-hour Relative Strength Index (RSI) recently experienced a significant drop, reaching levels not seen since August of the previous year.
This sudden fall was beneficial for scalp traders as Bitcoin managed to jump above $100k.
Crypto Market Liquidation
According to Bybit CEO Ben Zhou, the entire crypto market likely experienced a total liquidation of around $10 billion. This event caused a 6.6% price drop for Bitcoin (BTC) on the 3rd of February, reducing the entire crypto market cap by 11.7%.
The financial markets were shaken by Trump’s trade tariffs, causing a wave of fear among investors that also affected the crypto world. However, BTC managed to bounce back by over 8%, reclaiming a key support level.
RSI as a Market Indicator
The Relative Strength Index (RSI) is a tool used to measure the momentum of an asset over the past 14 trading sessions. An RSI above 70 indicates overbought conditions, while an RSI below 30 signifies oversold conditions.
On the 3rd of January, the 4-hour RSI for Bitcoin plummeted to 19.76. In the past, the reading dropped below 25 in December and to 16 in early August after BTC fell from just below $60k to $49k.
Despite the recent drop, Bitcoin’s reaction in the past 24 hours has been promising. The cryptocurrency has respected the range formation of the past two months between $92k and $106.2k. At the time of writing, the mid-range level at $99.1k is acting as support.
After testing the $92k support zone, Bitcoin quickly bounced back and touched $102.5k. The RSI moved back above neutral 50. In the past few hours, it has dipped 3% but remains above the mid-range level.
While the price action remains above key support zones, the On Balance Volume (OBV) has made a new lower low compared to the past month. This indicates that the increased selling volume over the past 36 hours has shifted the bias in favor of the bears.
The 24-hour liquidation heatmap showed that $97.5k and $94k were the immediate targets. Despite this, the quick bullish reaction from Bitcoin was a positive sign for investors. However, another drop to $94k-$95k is possible and traders should be prepared.
Please note that the information presented does not constitute financial, investment, trading, or any other types of advice and is solely the writer’s opinion.