Cryptocurrency analyst Benjamin Cowen is warning Bitcoin (BTC) could turn bearish based on the historical behavior of one widely used indicator.
In a new strategy session, Cowen tells his 887,000 YouTube subscribers that the Relative Strength Index (RSI) on Bitcoin’s weekly time frame is currently at a support level that has previously marked the end of the cycle whenever it breaks down.
[adinserter block="1"]The RSI is a momentum oscillator that is calibrated from zero to 100 and is used to identify oversold or overbought conditions, with a reading above 70 indicating overbought conditions and a reading below 30 indicating oversold conditions.
“Structurally there’s been no denying there have been similarities between this cycle and the 2016-2017 cycle. There’s sort of a weekly RSI support level that Bitcoin continues to try to hold support at. If it breaks, it’s possible that it means the cycle is over.”
Looking at the trader’s chart, he seems to suggest that BTC’s weekly RSI has support at around 44.
Bitcoin is trading at $86,096 at time of writing with the weekly RSI hovering at 50.
The widely followed analyst further says that if Bitcoin loses the RSI support level on the weekly time frame, it could be a sign that something is broken in the US economy and the Federal Reserve might step in and loosen monetary policy.
“If the weekly RSI breaks down below 44, then I think you really start to argue you’re going more so into the monetary policy view where the Fed’s going to try to come to the rescue at some point and hopefully they haven’t done too much damage to sort of repair things.
I think the bigger issue for the Fed this cycle than in 2019-2020 is that inflation wasn’t really an issue over here but it has been an issue recently.
And so they might not be as willing to support markets in the same way as quickly until it’s more apparent that inflation is actually coming back down to earth and we’re not going into just another inflationary wave.”
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