Bitcoin’s recently entered oversold territory, but don’t get too excited. One analyst, Dr. Cat, argues this is actually a bearish signal, not a bullish one, contrary to popular belief.
Why Oversold Doesn’t Always Mean Bullish
Dr. Cat explains that while oversold conditions might seem like a buying opportunity, the context is crucial. Oscillators, which measure oversold/overbought conditions, are limited – they can’t go beyond 0 and 100. However, Bitcoin’s price itself can keep dropping. He points out that all past Bitcoin bull markets showed overbought conditions on the weekly chart. Buying an oversold asset on a short-term chart when the long-term trend is bullish is smart, but assuming an oversold weekly chart automatically means a bullish trend is plain wrong. Many altcoins are currently oversold on longer timeframes and could continue dropping. Oversold conditions in a bull market might signal higher lows, but in a bear market, they could just mean more downward movement or a temporary pause before the price falls further. Dr. Cat references another analyst’s chart showing how daily oversold conditions played out differently a year ago depending on the overall market situation. He emphasizes he’s not predicting Bitcoin’s future direction, just clarifying the misunderstanding surrounding RSI (Relative Strength Index) and oversold/overbought signals.
Supply Exceeds Demand: More Bearish News
Adding to the bearish sentiment, CryptoQuant CEO Ki Young Ju highlights that Bitcoin’s supply currently surpasses demand. This reinforces the idea that holders are selling, not buying. Further evidence comes from analyst Ali Martinez, who notes that large Bitcoin holders (“whales”) have been cashing out, selling over 29,000 BTC since April 9th. Ki Young Ju even believes Bitcoin’s bull market is over, citing significant selling pressure.
At the time of writing, Bitcoin is trading around $84,600, down slightly in the last 24 hours.
