Bitcoin’s velocity relative strength index has flashed a rare signal that historically appears at major market bottoms. The indicator dropped below 10 on the 100-point scale, reaching levels last seen during previous bear market conclusions.
On-Chain Mind, a cryptocurrency analyst, highlighted the development in a social media post. The velocity RSI on Bitcoin’s three-day chart recorded its lowest reading since the bottom of the last three bear markets. This metric tracks recent price momentum changes and serves as a widely monitored indicator of exhaustion.
The velocity RSI on Bitcoin’s three-day chart. Source: On-Chain Mind/X
Historical Context Points to Cyclical Reset
The current reading mirrors chart patterns from Bitcoin’s 2018 bear market bottom. Similar conditions also emerged in mid-2022, approximately six months before the most recent bear market established its long-term floor. Traders consider this one of the more reliable momentum indicators for identifying cyclical turning points.
The signal arrives as Bitcoin price comparisons to previous bear markets have intensified in recent weeks. Extreme oversold conditions typically indicate that selling pressure has reached unsustainable levels. These readings have consistently preceded significant market recoveries in Bitcoin’s trading history.
A separate development has caught the attention of market analysts. Bitcoin’s long/short ratio has entered unprecedented territory, displaying behavior that deviates from past cycles.
Joao Wedson, founder of crypto analytics platform Alphractal, observed an unusual pattern. The long/short ratio typically rises above the average of major altcoins at price bottoms. This relationship has served as a reliable indicator for years.
However, the current cycle presents a different scenario. Bitcoin maintained extremely elevated long/short ratios for an extended period throughout November. Despite this, the price continued declining while generating false bottom signals. At the time of writing, Bitcoin is trading at $87,498, representing a 2.02% increase over the past 24 hours.
Bitcoin price chart, Source: CoinMarketCap
Potential Risks for Bullish Traders
This deviation from historical patterns carries implications for market participants. Traders attempting to establish long positions during the downturn may face increased risk. The elevated long/short ratio suggests an abundance of bullish positions in the market.
Large-volume players could exploit this positioning by driving prices lower to trigger liquidations. This dynamic creates a challenging environment for traders attempting to time a market bottom. The concentration of long positions at elevated levels provides liquidity for further downside moves.
The combination of an oversold velocity RSI and unusual long/short ratio behavior creates a complex technical landscape. While the velocity RSI suggests exhaustion conditions typical of market bottoms, the long/short ratio pattern indicates potential vulnerability for bullish positioning.
Source: https://coinpaper.com/12808/bitcoin-velocity-rsi-signals-potential-bear-market-bottom-as-oversold-conditions-emerge
