Bitcoin (BTC) is signaling a crucial bear market bottom at $87,000, with analysts suggesting that BTC’s price history may repeat itself.
Key points:
Bitcoin’s velocity RSI metric has returned to levels typically associated with bear market bottoms.
Consequently, BTC price action may be enacting a “major cyclical reset,” according to analysis.
The crypto long/short ratio has broken a longstanding trend as Bitcoin declines.
Velocity RSI indicates a potential BTC price bottom
In an X post on Tuesday, analyst On-Chain Mind highlighted rare single-digit readings on Bitcoin’s velocity relative strength index (RSI) indicator.
Many comparisons to past Bitcoin bear markets have emerged recently, but now a key BTC price indicator suggests a market bottom.
The velocity RSI, which considers recent changes in price momentum, has plunged below 10/100, reaching some of its most “oversold” levels in history.
“The Velocity RSI on the 3-day chart has just reached its lowest reading since the bottoms of the last three bear markets,” On-Chain Mind remarked.
An accompanying chart illustrated similar setups at the conclusion of Bitcoin’s 2018 bear market and midway through 2022, approximately six months before the latest bear market found its long-term support.
“It’s one of the more credible, widely monitored momentum exhaustion indicators, and it’s now signaling a level we typically see at major cyclical resets,” On-Chain Mind continued.
“A noteworthy technical signal deserving attention.”
Bitcoin long/short ratio reaches uncharted territory
From one perspective, current BTC price behavior stands apart from previous bearish cycles.
Related: Bitcoin contends with $50K price target as Fed injects $13.5B overnight liquidity
Not all traditional price metrics have responded similarly to recent events, including Bitcoin’s long/short ratio.
Joao Wedson, founder and CEO of the crypto analytics platform Alphractal, observed an unusual trend unfolding this week.
“Over time, we’ve identified several reliable Alpha signals in the crypto market. Historically, one of the most dependable has indicated that when Bitcoin’s Long/Short Ratio exceeds the average of major altcoins, it typically signals a price bottom forming. However, this time was different,” he told X followers.
“For the first time in history, BTC maintained this ratio at extraordinarily high levels for a prolonged period — and yet we witnessed false bottom signals throughout November, while the price continued to decline.”
Wedson explained that this could pose challenges for bulls. Traders overly eager to go long on BTC in a falling market might encourage large-volume players to liquidate positions by driving the price down further.
This article does not provide investment advice or recommendations. Every investment and trading decision carries risk, and readers should perform their own research before making decisions.
