The monthly relative strength index (RSI) of Bitcoin (BTC) shows the dominant cryptocurrency is primed for another rally.
Is 2021 an ideal time for a Bitcoin rally?
The RSI is a momentum indicator that measures whether an asset is overbought or oversold. When the RSI surpasses 75, it signals the asset is overbought, and when it drops below 30, it means the asset is oversold.
A pseudonymous trader known as “Crypto Capo” noted that the monthly RSI of Bitcoin is set to close above 80. Historically, when this has happened, BTC has saw a strong rally afterward.
Although the monthly RSI of Bitcoin is above 80, which is technically oversold, BTC’s RSI tends to become oversold for prolonged periods during a bull cycle.
The monthly RSI of Bitcoin. Source: Crypto Capo
Hence, traders often refer to an oversold RSI on a high time frame chart, like the monthly candle chart, to forecast an extended rally in the short term to medium term. The trader said:
“Monthly candle is about to close above 80. When this happens, bullish trend continues, with an avg. return of 1010.87%. Each cycle is shorter.”
However, the trader emphasized that one indicator cannot accurately predict the price cycle of Bitcoin. Crypto Capo explained that the combination of a few indicators could serve as guidance for the future. He wrote:
“You cannot base a prediction on an indicator. What we do is combining several methods to have a guideline for the future, to see what is more likely. But in the end, we adapt to what the price does in the present.”
“Bullish year ahead”
Traders have differing perspectives on where Bitcoin is headed in 2021, but most traders remain overwhelmingly bullish.
Cointelegraph Markets analyst Michael van de Poppe said he anticipates Bitcoin to reach $65,000 to $85,000 by next year’s end. He stated:
“I’ve got to revise my view on the potential level of $BTC at the end of 2021. Through this recent surge, I’m expecting it to be between $65,000-85,000 at the end of 2021. Bullish year ahead.”
Meanwhile, the options market is pricing in a 22% chance of Bitcoin achieving $120,000 by next year, which could also serve as a potential guideline on where BTC is heading in 2021.
In the short-term, however, some traders are cautious in entering leveraged positions. A pseudonymous trader known as “TheBoot” said the ideal scenario is to wait for Bitcoin to consolidate at $25,000 or enter after the next price upsurge. The trader explained:
“No rush to enter leveraged trades on $btc right here imo. Best would be to wait and long low 25k or even mid 24k. Alternatively, wait for the next leg up and then a dip from there.”
Cointelegraph previously reported that whales have been buying Bitcoin more aggressively since Christmas, which could buoy the mid-term bull case for BTC entering into 2021.
Title: ‘Bullish year ahead’ — Bitcoin primed for Q1 2021 gains, strength index suggests
Sourced From: cointelegraph.com/news/bullish-year-ahead-bitcoin-primed-for-q1-2021-gains-strength-index-suggests
Published Date: Tue, 29 Dec 2020 17:34:19 +0000
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