In a recent video, an analyst from the popular Crypto Banter channel warned viewers that cryptocurrency investors are currently in “one of the biggest traps of all time.” But he also outlined a scenario where Bitcoin could be on the verge of a major breakthrough.
This is the oldest trick in the book. (…) Let me briefly explain why you should not fall into that trap and how you can identify what it looks like.
A potential pitfall involves the Relative Strength Index (RSI), a technical indicator that measures the momentum and speed of price changes of an asset. The cryptocurrency analyst explained that many retail investors incorrectly view low RSI readings as a sign of weakness and a signal for a liquidation.
However, analysts believe this is a misunderstanding of what low RSI levels mean. Looking back historically, some of Bitcoin’s (BTC) biggest rallies began after RSI fell into oversold territory below 30.
It is not a sign of weakness. That’s not a sign of exhaustion. This is a sign of strength within the market.
In addition to making a bullish case based on past RSI trends, the analyst pointed to MicroStrategy’s recent $750 million Bitcoin purchase as a potential catalyst. MicroStrategy’s acquisition marks the third-largest Bitcoin acquisition of all time.
The analyst believes there are similarities between the current situation and previous instances where significant institutional buying helped trigger further buying and higher prices. If history repeats itself, ‘institutional FOMO’ could skyrocket.
The analyst presented an optimistic scenario, acknowledging that Bitcoin could first trend lower after failing to clearly break $40,000. However, he expects the retracement to be limited before the uptrend resumes.
As always in the cryptocurrency market, there are bullish and bearish cases to consider. But the analyst sees the stars aligning to leave what he believes is “one of the biggest pitfalls of all time,” especially as Bitcoin embarks on its next major rally.