Bitcoin is generally supported but current conditions are overbought



Bitcoin has had an astounding start to December. The cryptocurrency is already up around 17% and it is only the first week of the month. However, there is a question of whether it has run too hard too soon. Bitcoin's daily RSI is severely overbought at 90.10 – a reading of 80 or above is considered as overbought. Given this reading, there may be a near-term price ceiling for the cryptocurrency. In other words, a pullback to release some pressure, normalise the indicator, and clear the froth will potentially lay the platform for potentially higher prices ahead.

Bitcoin is trading near the $44,000 mark. This is the highest level since April 2022. This optimism stems from potential approval by US regulators for the first spot Bitcoin exchange traded fund. However, there are other factors that are also powering the cryptocurrency's uptrend. The Federal Reserve has likely reached the apex of its current hiking cycle, with markets pricing in 125bps of cuts next year. This has seen risk instruments appreciate, with Bitcoin leading the way. Moreover, indications point to a reluctance by Bitcoin holders to sell, creating a scarcity that is expected to intensify next year due to the anticipated Bitcoin "halving." This will effectively reduce the issuance of the cryptocurrency.

There are buyers on the sidelines to support Bitcoin. However, given the RSI's overbought condition, current holder may be spurred into action to bank profits before the next leg up commences.

Russell Shor

Senior Market Specialist

Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.

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