A Bitcoin price signal is in oversold conditions for only the 7th time during the last 8 years or so. The largest digital currency by market capitalization is currently hovering around $51k as it looks to make further recoveries after a bearish last few weeks that saw the index reach a multi-month low of $41k.
The Bitcoin Advanced NVT signal was created by Philip Swift who also co-founded the larger platform called LookingIntoBitcoin. According to this price metric, the cryptocurrency may lie in overbought or oversold conditions at a certain point in its trading using a mixture of market capitalization and network volume itself.
According to the Bitcoin Advanced NVT signal, the cryptocurrency started to fall back into the oversold territory back in late November when the index fell to $56k and then further below. Back then, it started suggesting that the digital currency was in for a price bounce. However, the short-term bears sprung back into action and pulled the cryptocurrency further below, bringing it deep into oversold territory, which isn’t something you see that very often. This has only occurred 7 times during the last eight years which is something.
According to Swift:
1/ A lot of fear in the market currently, which makes me bullish.
Lots of indicators suggest we are near a bottom.
Advanced NVT Signal looks at price relative to onchain transactions. It has only been this oversold a few times before, each time resulting in a strong bounce. pic.twitter.com/binLC6AgZX
— Philip Swift (@PositiveCrypto) December 7, 2021
Swift also suggested that various other analytics show that the cryptocurrency was in for a price reversal and that below $50k was definitely going to be a short-term bottom. The cryptocurrency has already pulled itself above the $50k resistance and is now looking at further obstacles ahead. Bitcoin’s more conventional statistics like the Relative Strength Index (RSI) are also in deep oversold conditions and suggest a price reversal too.
However, statistics are often misleading and may or may not result in immediate price action. In a bear market, the cryptocurrency has a history of remaining in oversold conditions for long times and still result in no major upwards price action. Similarly, in a bull market, the indicators have remained in overbought conditions for a long time and even then the price index keeps on posting price increases. So, in the immediate short-term while the bulls can gain some confidence from these oversold conditions, it is ultimately the actual price index that is the biggest metric and it is looking to compose itself after a week or so of massive losses. Once the bulls feel confident enough, we can have further price action.
Image Source: pixabay.com
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