Bitcoin bulls just joining the rally are very late to the party, analyst says

Bitcoin (BTC), the leading cryptocurrency by market value, has gained over 40% in four weeks and is trading just 12% short of its record high near $69,000.

Such an uber-bullish market condition often has short-term traders and speculators, who missed the early rally, jump in with both feet, using riskier leveraged products like futures to maximize gains and make up for initially sitting on the sidelines.

If you are one of those short-term traders, you might want to consider the new information, which suggests chasing the rally now may be risky, according to the news and analysis website The Market Ear.

“Bitcoin [14-day] RSI at 88. We have not seen RSI this overbought AND Bitcoin trading at these absolute levels, ever,” analysts at The Market Ear said in Thursday’s edition of the newsletter.

“Chasing it here looks like a very late trade,” analysts added.

RSI, developed by J. Welles Wilder, is a momentum indicator that measures the speed and change of price movements over a set period, usually 14 days or 14 weeks.

A reading above 70 reflects overbought conditions or a situation where the asset's price has seen a long run of successively higher prices or rallied a little too fast and may correct lower soon.

The RSI indicates overbought conditions. (The Market Ear, Refinitiv) (The Market Ear, Refinitiv)

Never before has the RSI reached this high, alongside plus $60,000 Bitcoin price. The indicator peaked between 65 and 75 the last time Bitcoin traded above $60,000 in early 2021 and November 2021.

Bitcoin’s present value relative to the RSI lends credibility to the overbought signal, calling caution on the part of speculators looking for a long entry at the going market rate.

That said, RSI is not the holy grail. Markets often maintain a strong upward trajectory for days and weeks, keeping the RSI above 70 for a prolonged time. As Newton’s law says, “An object in motion stays in motion with the same speed and in the same direction unless acted upon by an unbalanced force.”

The overbought reading is of little importance to existing or new long-term investors whose strategy is to buy and hold for long-term growth. Investors typically do not worry about short-term price swings and focus on the big picture.

According to analysts, Bitcoin’s big picture is bullish, thanks to the halving, which reduces supply expansion by 50% every four years, and Wall Street’s recent embrace of the spot bitcoin ETFs. The consensus is that the cryptocurrency could draw a price of $120,000 and higher by September 2025.