The Bitcoin’s weekly Relative Strength Index (RSI) has fallen to 25.6, the lowest level ever recorded since the creation of the cryptocurrency. This reading, which indicates an extreme over-selling condition, has generated heated discussions among analysts and investors about its real meaning: a forecast of a recovering market (bull market) or a warning sign for future losses.
The RSI is a moment oscillator that measures the magnitude of recent price changes to assess conditions of overbought or overselling on an asset. Traditionally, an RSI below 30 suggests that an asset may be being sold over and may be prepared for an upward reversal. However, the fact that Bitcoin has reached a new historical minimum for this indicator, surpassing previous drops, adds a layer of uncertainty to classical interpretation. Historically, the RSI at low levels has preceded recovery periods for Bitcoin, but the absence of a precedent to such a low value makes the analysis more complex.
While the RSI points to a potential buying opportunity due to over-selling, other macroeconomic and regulatory factors continue to influence the market sentiment. Global uncertainty, central bank monetary policies and regulatory scrutiny over cryptocurrencies in various jurisdictions can weigh on the asset price, even in technical over-selling conditions. It is crucial for investors to understand that technical indicators alone do not guarantee future results. Fundamentalist analysis and macroeconomic context are equally important for informed decision making.
In this volatility scenario, long-term investment strategies are gaining prominence. One analysis suggests that keeping Bitcoin for at least three years can significantly reduce the risk of losses. This approach, known as HODLing, is based on the belief that despite short-term fluctuations, the value of Bitcoin tends to be appreciated over time. Investors who adopt this strategy usually seek to minimize the impact of daily and weekly fluctuations by focusing on long-term growth potential. On the other hand, short-term investors face a considerably higher risk as they are more exposed to abrupt market movements and to more volatile and sales conditions.
Recently, the Kalshi prediction platform faced controversy by canceling a bet related to Iran’s supreme leader, Ali Khamenei, for ethical reasons. Although the company has promised to reimburse users, many have financial losses due to the decision. This incident, although not directly linked to Bitcoin, illustrates the risks and complexities that may arise in markets involving bets and predictions, reinforcing the need for caution and diligence in any type of investment, especially in digital assets.
For the Brazilian investor, who navigates in an economic and regulatory environment of his own, the understanding of these metrics and the adoption of prudent strategies are fundamental. Bitcoin volatility is a constant, but careful analysis of indicators, combined with a long-term vision and awareness of the risks involved, can be the way to mitigate losses and potentially capitalize on opportunities.