Bitcoin's Reliable RSI Variant Signals Bear Market Bottom at $87,000

Bitcoin is signaling a crucial bear market bottom at $87,000, as analysts suggest that historical patterns may repeat themselves.

Key Takeaways

Bitcoin’s velocity RSI metric is indicating levels typically associated with bear market bottoms.
Current price action may reflect a significant cyclical reset, according to analysts.
The long/short ratio of cryptocurrencies has deviated from its usual behavior as Bitcoin continues to decline.

Bitcoin's ‘more reliable’ RSI variant hits bear market bottom zone at $87K

Understanding the Velocity RSI and Bear Market Signals

On Tuesday, analyst On-Chain Mind highlighted that Bitcoin's velocity relative strength index (RSI) has recorded rare single-digit readings. This is significant, as Bitcoin's recent bear market comparisons have increased, leading to the conclusion that a market bottom might be on the horizon.

The Velocity RSI measures recent price momentum changes and has now dipped below 10/100, reaching its most oversold levels in history. As On-Chain Mind noted, “The Velocity RSI on the 3-day chart has just hit its lowest reading since the bottoms of the last three bear markets.” An accompanying chart illustrated similar indicators at the end of Bitcoin's bear market in 2018 and around mid-2022, just months before the market floor was established.

“This is one of the most reliable and widely tracked momentum exhaustion indicators, and it's signaling a level we only observe during significant cyclical resets,” On-Chain Mind added.

BTC/USD three-day chart with Velocity RSI data. Source: On-Chain Mind/X

Anomalies in Bitcoin's Long/Short Ratio

From a different angle, Bitcoin's current price behavior is distinctly different from its past bearish trends. Not all price metrics have responded similarly to current market events, including Bitcoin’s long/short ratio.

Joao Wedson, the founder and CEO of the crypto analytics platform Alphractal, pointed out an unusual trend emerging this week. “We’ve identified several robust Alpha signals in the crypto market over the years. One reliable indicator has always been this: when Bitcoin’s Long/Short Ratio exceeds the average of major altcoins, it historically indicates a price bottom forming. However, this time something different occurred,” he shared with his X followers.

Crypto long/short ratio data. Source: Joao Wedson/X

Wedson elaborated that this divergence could negatively impact bullish traders. He noted that traders overly eager to long Bitcoin while trying to "catch a falling knife" may prompt large-volume players to liquidate their positions by pushing the price down further.

By tracking these metrics and understanding the implications of the velocity RSI and long/short ratio, traders can better navigate the evolving landscape of cryptocurrency markets as Bitcoin approaches this pivotal point.