Bitcoin’s Relative Strength Index (RSI) drops to levels not seen since September, indicating potentially oversold conditions despite BTC’s price above $40,000.

Bitcoin (BTC) is on a rollercoaster ride as its Relative Strength Index (RSI) hits its lowest level in four months. The RSI suggests potentially oversold conditions despite trading above the $40,000 mark. 

Analyst Matthew Hyland highlighted this development, shedding light on a hidden bearish divergence, where the RSI is making lower lows while Bitcoin’s price manages to make higher lows.

BTC RSI signals a potential reversal

After a 15% drop following the launch of the United States’ first spot Bitcoin exchange-traded funds (ETFszz), BTC’s price performance has been struggling to recover. As traders remain cautious about further downside risks, the RSI indicates that a reversal might be on the horizon. 

The daily RSI, which has dipped below the midpoint of 50/100, faces its next significant test at the “oversold” threshold of 30/100.

Seth, a popular trader and social media commentator, preferred the daily RSI to dip into the oversold territory, signaling a possible buying opportunity for Bitcoin.

 On shorter timeframes, the RSI has briefly breached the 30/100 level this week, recovering each time and forming higher lows.

Another indicator reflecting Bitcoin’s current situation is the Bollinger Bands volatility indicator. The daily chart for BTC/USD shows the cryptocurrency returning to a volatile state after constriction. 

Current prices have brought Bitcoin close to the lower boundary of the expanding channel, a level not significantly tested since mid-September.

Bitcoin’s recent performance

Bitcoin’s price has seen significant fluctuations recently, notably dropping to around $25,000 after the launch of the first U.S. spot Bitcoin ETFs. Since then, it has struggled to regain its previous levels, with traders remaining cautious about further potential downside. 

The RSI suggests a reversal could be imminent, although the crypto market remains highly unpredictable.

Despite the recent price volatility, some traders view the current conditions as an opportunity. Historically, when the RSI reaches “oversold” levels below 30, it can indicate a potential buying opportunity. On the flip side, reaching “overbought” levels above 70 can signal the start of a strong upward trend.

As Bitcoin continues its journey through the crypto markets, traders and investors eagerly await signs of a definitive trend. The RSI and Bollinger Bands offer valuable insights into potential price movements, but the cryptocurrency market remains inherently unpredictable