Bitcoin | Fundamental Analysis | NEXT TARGETS | MUST READ ! ! !
Investors should never try to time the market. Consistent investment over a long period of time has been proven to provide the safest path to significant returns. But even if that's true, that doesn't mean that investors can't try to maximize their potential opportunities. And right now, bitcoin has plenty of room for growth.
The Relative Strength Index (RSI) is a simple metric used to measure the speed and magnitude of recent price changes in an asset to determine whether it is overvalued or undervalued. It is believed that when an asset's RSI falls into undervalued territory, it is theoretically a great time to buy, as the risk of further price declines is minimal.
It should be noted that this does not mean that prices should immediately return to the highs. In fact, RSI values can remain in undervalued territory for several months. The advantage of tracking an asset's RSI is that investors can make more informed decisions based on current conditions in a broader historical context.
RSI values range from 0 to 100. Traditional usage of RSI states that values above 70 indicate an overbought asset. Conversely, values below 30 are usually an indication that assets are oversold and therefore undervalued.
So what does today's Bitcoin RSI indicate? It shows that bitcoin is at a level it has never seen before. In the history of Bitcoin, its monthly RSI has never fallen below 41. This August, bitcoin's monthly RSI is at 41. In June, it hit its lowest point ever, falling to 39. It has also never fallen below 43 for three consecutive months, which is what happened from June through August of this year.
Historically, bitcoin has never been so oversold. In the 2015 bear market, bitcoin's RSI only dipped to 43 but was in the 43 to 47 range for most of the year.
The recent 2018-2019 bear market recovered faster than in 2015 but showed that bitcoin's RSI tends to bottom around the low 40s. From November 2018 through March 2019, the monthly RSI never exceeded 45.
In hindsight, those two periods when the RSI dipped to the 40 mark were some of the best opportunities to buy bitcoin. Let's imagine that you invested $1,000 in bitcoin at the lowest RSI level and then sold when the RSI reached an overbought level of at least 70 again.
In January 2015, bitcoin's RSI was at 43 and the price was only about $200. It wasn't until January 2017 that bitcoin's RSI rose above 70 again. An investment of $1,000 at the low point would have been worth $5,000 by the time the RSI reached 70 again - a 400% increase.
As an example, let's take the recent bear market. A $1,000 investment at the low point of 41 in January 2019, when bitcoin was worth about $3,300, would have eventually turned into about $4,500 by the time bitcoin reached over $15,000 and the RSI was 76 in November 2020. That's a 350% gain.
It should be noted that bitcoin often crosses the RSI 70 mark once it gains momentum. In theory, investors could make more profits if they sell when the RSI peaks around 90, but that could lead to a greater risk of not making a profit. Remember, there is nothing wrong with taking profits.
Now that bitcoin is near the bottom of its historical RSI level, there is an opportunity that comes up every so often. Investing in bitcoin today minimizes potential risk and maximizes future returns.
It often takes more than six months to return to RSI levels of 70 or higher, but judging by recent events around bitcoin, it could reach healthier RSI levels sooner than usual. The partnership between Coinbase and BlackRock will allow institutional clients of the world's largest asset manager to buy bitcoin and could end up with trillions of dollars in cryptocurrency funding. Institutional investors typically have much more capital than the average retail investor.
So far, Bitcoin's rise to the most expensive cryptocurrency is a result of it being bought and held mostly by retail investors. Now that BlackRock clients can buy bitcoin, institutional investors may be able to send bitcoin well beyond its all-time high. Take your time, but be assured that past data and current trends confirm that today may be one of the best times to buy bitcoin.
The Relative Strength Index (RSI) is a simple metric used to measure the speed and magnitude of recent price changes in an asset to determine whether it is overvalued or undervalued. It is believed that when an asset's RSI falls into undervalued territory, it is theoretically a great time to buy, as the risk of further price declines is minimal.
It should be noted that this does not mean that prices should immediately return to the highs. In fact, RSI values can remain in undervalued territory for several months. The advantage of tracking an asset's RSI is that investors can make more informed decisions based on current conditions in a broader historical context.
RSI values range from 0 to 100. Traditional usage of RSI states that values above 70 indicate an overbought asset. Conversely, values below 30 are usually an indication that assets are oversold and therefore undervalued.
So what does today's Bitcoin RSI indicate? It shows that bitcoin is at a level it has never seen before. In the history of Bitcoin, its monthly RSI has never fallen below 41. This August, bitcoin's monthly RSI is at 41. In June, it hit its lowest point ever, falling to 39. It has also never fallen below 43 for three consecutive months, which is what happened from June through August of this year.
Historically, bitcoin has never been so oversold. In the 2015 bear market, bitcoin's RSI only dipped to 43 but was in the 43 to 47 range for most of the year.
The recent 2018-2019 bear market recovered faster than in 2015 but showed that bitcoin's RSI tends to bottom around the low 40s. From November 2018 through March 2019, the monthly RSI never exceeded 45.
In hindsight, those two periods when the RSI dipped to the 40 mark were some of the best opportunities to buy bitcoin. Let's imagine that you invested $1,000 in bitcoin at the lowest RSI level and then sold when the RSI reached an overbought level of at least 70 again.
In January 2015, bitcoin's RSI was at 43 and the price was only about $200. It wasn't until January 2017 that bitcoin's RSI rose above 70 again. An investment of $1,000 at the low point would have been worth $5,000 by the time the RSI reached 70 again - a 400% increase.
As an example, let's take the recent bear market. A $1,000 investment at the low point of 41 in January 2019, when bitcoin was worth about $3,300, would have eventually turned into about $4,500 by the time bitcoin reached over $15,000 and the RSI was 76 in November 2020. That's a 350% gain.
It should be noted that bitcoin often crosses the RSI 70 mark once it gains momentum. In theory, investors could make more profits if they sell when the RSI peaks around 90, but that could lead to a greater risk of not making a profit. Remember, there is nothing wrong with taking profits.
Now that bitcoin is near the bottom of its historical RSI level, there is an opportunity that comes up every so often. Investing in bitcoin today minimizes potential risk and maximizes future returns.
It often takes more than six months to return to RSI levels of 70 or higher, but judging by recent events around bitcoin, it could reach healthier RSI levels sooner than usual. The partnership between Coinbase and BlackRock will allow institutional clients of the world's largest asset manager to buy bitcoin and could end up with trillions of dollars in cryptocurrency funding. Institutional investors typically have much more capital than the average retail investor.
So far, Bitcoin's rise to the most expensive cryptocurrency is a result of it being bought and held mostly by retail investors. Now that BlackRock clients can buy bitcoin, institutional investors may be able to send bitcoin well beyond its all-time high. Take your time, but be assured that past data and current trends confirm that today may be one of the best times to buy bitcoin.
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