Bitcoin rose above $ 12,000 on Wednesday for the first time since August 2020, but it signals an impending price correction because it is now in what is known as an „overbought“ range.
Bitcoin’s 14-day Relative Strength Index readings surged above 70 – a level above which an asset’s bullish trend is considered overused. Although this does not mean a price crash, it certainly indicates that the cryptocurrency could, in the best case, experience a consolidation or a retracement.
The last three RSI retracements from overbought zones this year coincided with one major price crash and two consolidation moves
In early February 2020, the RSI peaked at 74.33, which was later followed by a huge drop – from $ 10,522 to as low as $ 3,858. Meanwhile, Bitcoin moved in a sideways range with a bias towards the bulls on the subsequent overboughts.
With that, the cryptocurrency found itself in a contradicting scenario as its price tries to hold $ 12,000 as support.
Some analysts expect Bitcoin price to continue climbing despite its overbought status. A pseudonymous analyst estimates that BTC / USD could march towards $ 15,000 – nearly a thousand dollars above its 2019 high.
Meanwhile, Bitcoin bull Pierre Rochard also spoke on the subject. He recalls the recent investments of large institutions in Bitcoin (MicroStrategy, Square, etc.) and adds that more companies would “panic” buy the cryptocurrency in exchange for their unprofitable investments. Extracts:
“Square only bought $ 50 million worth of Bitcoin. They will buy more in a panic. And finally, [Apple] will panic buy. Holding and rolling fiat-denominated fixed income „cash equivalents“ with short maturities is financially irresponsible due to inflation. „
Logan Han, a daytrader cum market analyst, also estimates Bitcoin at $ 20,000 (the all-time high) if the cryptocurrency manages to hold or consolidate over $ 12,000.
„The lower $ 12K region is a historically crucial price range for Bitcoin,“ explains Han. And:
„If BTC can take a leap here and hit $ 14,000, there will be nothing stopping BTC from going straight to $ 20,000.“