The following chart shows the full Bitcoin bull market in US dollar from 2017-2018 with a logarithmic price scale on a 3-day time scale (that is unique to Kraken). During this phase there were multiple instances where the market exhibited a lasting overbought condition with the RSI (9) reaching above 90, identified from (1) to (4), with number (4) signaling the bursting of the Bitcoin bubble. Every such extremely overbought condition during this 2017-2018 bull run has been followed by a deep price correction:
Three-Day Bitcoin Price Chart – April to December 2018 (RSI 9)
By mid-December 2018 the Bitcoin bubble has finally burst when reaching a low of $3,120 from an all-time-high of $19,960 corresponding to a price decline of 84% (please read again our previous blogpost Monthly Bitcoin Price Bubble Popping: Wake Me Up When 2018 Ends! in which we had predicted for the price correction to reach the $4,000 price area). After recovering from $3,120 to more than $8000 another extremely overbought reading is now developing:
Three-Day Bitcoin Price Chart – October 2018 to May 2019 (RSI 9)
This is not a call that the market has topped right now and will recede immediately below the declining trend line (zoomed area) since it is fully possible to see another break higher that could bring the Bitcoin price in the $9,000 to $10,000 price zone. Whatever scenario develops – a break higher or a failure below the $8,000 level – a deep correction in the $6,000 to $6,500 should be expected that will present itself as the next buying opportunity.
Speculators beware: for now the risk is squeezed to the downside and it is prudent to wait for a safer market condition before going long Bitcoin.