A popular crypto analyst thinks one metric might hold the key to revealing if Bitcoin (BTC) is headed for a breakout after weathering a sudden price drop at the start of the week.
In a new YouTube update, Justin Bennett discusses Bitcoin’s relative strength index (RSI), a metric analyzing the crypto asset’s candle oscillation over 14 periods.
In Bitcoin’s case, Bennet examines BTC on a daily time frame. The analyst highlights comparable chart movements that occurred in the summer of 2021 as well as last month.
“Now recently ever since these highs up here [approximately $60,000 to $66,000] from the price we saw the RSI do something very similar. We had these lower highs that formed a trend line. This trend line broke her back here [January 2022], it made a run up just like it did back here [August 2022] and now it’s pulling back.
What’s interesting about this though is [looking] at the level where the RSI is pulling back right now. You can see that it lines up exactly to what we saw back here in September. Right now the RSI’s bouncing right from that same level, and obviously this was right when we saw Bitcoin put in a low and then go on a big move.”
Bennett next highlights two previous RSI indicators from spring and summer of 2021, as well as in January when BTC dipped to $33,000.
“I do find it very interesting that the RSI is bouncing from the same level that it did back here [September/October 2021] after a breakout from a downtrend, and furthermore the RSI back here at these lows between May and July [of 2021] is also very close to this low that we saw down here [January 2022] at $33,000.”
As he closes his detailed analysis, Bennett says that Bitcoin looks positive on the technical side and that he’s waiting to see if buyers are willing to enter the market.
“The fundamentals don’t look great, but the technicals are there. So if buyers decide that now is the time to push the price higher, I think that all the technicals are there for it to happen. We’ve seen the market bounce from a confluence of support. We have an hourly descending broadening wedge which is technically a bullish pattern.
We have bullish divergence on the RSI because if we look here on the hourly [from February 17th onward] we can see the RSI starting to make higher lows as the market has been making lower lows. We also have the RSI on the daily that I just showed you bouncing for my key level we saw in 2021. There are a ton of indicators here pointing to a potential rally in the future, but buyers have to confirm it.”
The analyst says such confirmation would come from Bitcoin closing above the trend line of approximately $38,500 and then a daily close above $39,600.
“If Bitcoin can reclaim this area, then in my opinion we are looking at a move at least back toward $46,000, if not up toward the $50,000 area.”