Bitcoin’s monthly RSI has surpassed 80, an event that historically precedes further rises: ‚Next year will be bullish,‘ an analyst predicts
Bitcoin’s (BTC) monthly Relative Strength Index (RSI) shows that the leading cryptocurrency is poised for another rise.
Is 2021 the perfect time for a Bitcoin rally?
The RSI is a momentum indicator that measures whether an asset is in an overbought or oversold condition. When the RSI exceeds 75, it signals that the asset is overbought; when it falls below 30, it means that the asset is oversold.
A pseudonymous trader known as „Crypto Chief“ pointed out that Bitcoin’s monthly RSI is set to close above the 80 level. Historically, this event precedes a strong BTC rally. Even if the monthly indicator is above 80, thus in overbought conditions, BTC’s RSI tends to stay in this territory for extended periods during a bullish cycle.
Bitcoin’s Monthly RSI
Bitcoin’s monthly RSI. Source: Crypto Chief
Therefore, traders often refer to an overbought RSI on extended interval charts, such as the monthly chart, to predict a sustained rally in the short to medium term. The trader commented:
„The monthly candle is about to close above 80. When this happens, the bullish trend continues with an average return of 1010.87%. Each cycle is shorter than the previous one.“
However, the trader pointed out that a single indicator cannot accurately predict the Bitcoin price cycle. Crypto Chief explained that the combination of different factors could act as a guide for the future:
„You cannot base a prediction on a single indicator. What we do is combine different methods so that we have a guideline for the future, to look at what is most likely. But in the end, we adapt to what the price is doing in the present.“
„Next year will be bullish“
Traders have different perspectives on Bitcoin’s direction in 2021, but most remain extremely bullish. Michaël van de Poppe, an analyst at Cointelegraph Markets, predicts that Bitcoin will reach levels between $65,000 and $85,000 by the end of 2021:
„I have to revise my view on the potential level of $BTC at the end of 2021. Due to this recent increase, I expect it to be between $65,000 and $85,000. Next year will be bullish.“
Meanwhile, the options market has a 22% probability that Bitcoin will reach $120,000 by the end of next year, a target that could be a potential guideline for BTC’s direction in 2021.
However, in the short term some traders are cautious about opening leveraged positions. According to a pseudonymous trader known as ‚TheBoot‘, the ideal scenario is to wait for Bitcoin to consolidate at $25,000 or open a position after the next price rise. The trader explained:
„In my opinion, there is no rush to open leveraged positions on $BTC here. It would be better to wait and open a long around $25,000 or even $24,500. Alternatively, wait for the next rise and a subsequent fall.“
As Cointelegraph previously reported, whales have been buying Bitcoin more aggressively since Christmas, which could support the medium-term bullish hypothesis for BTC in 2021.