Bitcoin’s monthly RSI is above 80, which historically led to large upward runs in the past.
The Bitcoin Monthly Relative Strength Index (RSI) shows that the dominant cryptomone is ready for another rally.
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The RSI is a momentum indicator that measures whether an asset is overbought or oversold. When the RSI exceeds 75, it indicates that the asset is overbought, and when it falls below 30, it means that the asset is oversold.
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A trader known as „Crypto Capo“ noted that Bitcoin’s monthly RSI will close above 80. Historically, when this has happened, BTC has experienced a strong rebound thereafter.
Although Bitcoin’s monthly RSI is above 80, which is technically oversold, BTC’s RSI tends to overshoot for extended periods during a bullish cycle.
Bitcoin Monthly RSI. Source: Crypto Capo
Therefore, traders often refer to an oversold RSI on a high time frame chart, such as the monthly candlestick chart, to forecast an extended rally in the short to medium term. The trader said:
„The monthly candlestick is about to close above 80. When this happens, the upward trend continues, with an average return of 1010.87%. Each cycle is shorter“.
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However, the trader emphasized that an indicator cannot accurately predict the price cycle of Bitcoin. Crypto Capo explained that the combination of some indicators could serve as a guide for the future. He wrote:
„You cannot base a prediction on one indicator. What we do is combine several methods to have a guideline for the future, to see which is more likely. But in the end, we adapt to what the price does in the present.
„Bullish year ahead“
Traders have different perspectives on where Bitcoin is headed in 2021, but most remain overwhelmingly optimistic.
Cointelegraph Markets analyst Michael van de Poppe said he expects Bitcoin to reach $65,000 to $85,000 by the end of next year. He said:
„I have to revise my view on the potential level of $BTC by the end of 2021. Through this recent increase, I expect it to be between $65,000-85,000 by the end of 2021. A year ahead of us is a bullish one“.
In the meantime, the options market is assessing a 22% probability that Bitcoin will reach $120,000 by next year, which could also serve as a potential guide to where BTC is headed in 2021.
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However, in the short term, some traders are cautious about entering into leveraged positions. One trader known as „TheBoot“ said the ideal scenario is to wait for Bitcoin to consolidate at $25,000 or enter after the next price hike. The trader explained:
„There’s no rush to get into leveraged trading at $btc right here, in my opinion. It would be best to wait and put long positions below 25k or even 24k. Alternatively, wait for the next leg and then drop from there“.
Cointelegraph reported earlier that whales have been buying Bitcoin more aggressively since Christmas, which could drive the medium term upward case for BTC to enter 2021.