Bitcoin (BTC) traders are anticipating a short-term correction as a key BTC price strength indicator rises to its highest level in almost fifteen weeks.
Key takeaways:
- Bitcoin’s “overbought” RSI historically precedes significant corrections.
- Bitcoin may see a short-term decline in price if the price falls below the $78,000 support.
Bitcoin Indicators Suggest BTC Price Is ‘Overheated’
Bitcoin’s 36% surge to $82,800 on Wednesday from a macro low of $60,000 significantly impacted its daily RSI.
On the daily chart, the RSI rose to 70 on Wednesday from local lows of 39 in March.
“$BTC’s daily RSI was overbought as we flagged the 200-day EMA,” trader Jelle he said in a Friday post on X, adding:
“It’s worth finding resistance here.”
BTC/USD weekly chart. Source: Cointelegraph/TradingView
The RSI measures the strength of a trend and contains three key levels for observers: the oversold line at 30, the midpoint at 50, and the overbought level at 70.
When the price breaks above these levels, depending on the direction, traders can make inferences about the future of the current trend. Following rallies, BTC usually corrects when RSI enters overbought territory.
Related: Bitcoin bulls target 115,000. dollars until December: do the data confirm expectations?
Crypto Tice analyst he said this is a “rare” signal that has only appeared four times over the past year, with each occurrence leading to a “short-term slowdown”, adding:
“Daily buyout conditions don’t resolve sideways. They resolve with the suit.”
Fellow analyst Rekt Fencer he noticed that “the last 2 times this happened, the decline” was 35-38% as shown in the chart above.
Meanwhile, Bitcoin’s market value to realized value (MVRV) ratio, which measures whether an asset is overvalued, recently entered the “overheated” zone.
“Bitcoin breaks through overheated level on short-term holder Bollinger Bands for the first time since November 2024” – FrankAFetter analyst he said in the last post on X.
The last time it was at a similar level was in November 2024, before the BTC price dropped by 15%.
Bitcoin STH MVRV Bollinger Bands. Source: CheckOnChain
Bitcoin support at $78,000 becomes crucial for BTC price
Bitcoin traders agree that $78,000 has now become an essential support area for BTC/USD.
Jelle Analyst: 200-Day Exponential Moving Average at $83,000 Acts as Resistance While “First Major Area of Concern Is $78,000.” he said on Friday in post X, adding:
“Turn this into support and we can try our hand at MA again.”
BTC/USD daily chart. Source: X/Jelle
Fellow Tradermayne analyst he said holding support at $78,000-$80,000 on a low time frame would give “bulls a very easy bias level.”
BTC/USD weekly chart. Source: Trader Mayne
Orders are on both sides of the spot price, and the Master of Crypto analyst sees the likelihood of these liquidity clusters being eliminated.
“$BTC remains around the support zone at $78.5k-79.1k,” analyst he said in a Friday post on X, adding:
“If buyers defend this area, the next move could be towards $82-83K, where there is plenty of liquidity. But if this support is broken, Bitcoin could quickly drop to $75-76K.”
Bitcoin liquidation heat map. Source: CoinGlass
Bitcoin’s liquidity map shows that a correction below $78,000 would trigger over $3.1 billion in leveraged long liquidations across all exchanges.
Bitcoin exchange liquidation map. Source: CoinGlass
