The comparison between deeply oversold RSI and the long-term price action of BTC shows it is profitable to buy. Although some traders foresee an optimistic change, cryptocurrencies must face macro challenges like a bullish divergence.
Since there are few signs of an upcoming recovery, the bulls consider the daily price action of Bitcoin (BTC) far from satisfactory.
In line with the trend in the first half of 2022, some factors continue to influence the price of BTC. The possibility of strict regulation, interest rate hikes by the Fed, the Russia-Ukraine conflict, and a possible recession are among those circumstances.
Due to those problems, institutional investors have lost interest in high-volatility assets while the euphoria about the 2021 bullish market has faded significantly.
Although the daily price action of Bitcoin is discouraging, longer-duration metrics show interesting data about investor sentiment and valuation perception.
The Bitcoin Market Still Has to Face Oversold Conditions
The price of Bitcoin puts long-term downward pressure on the daily and weekly timeframe. Besides, the Bollinger Bands, which reflect two standard deviations above and below a simple moving average (SMA), are becoming tighter.
The relative strength index (RSI) reached a multi-year low due to the sell-off of Bitcoin from March 28th to June 13th. In addition, comparing the indicator against the long-term price action of BTC shows it is profitable to buy with a deeply oversold RSI.
Despite the pessimistic short-term situation, a skeptical view of the price and the market suggest a favorable time to hoard.
According to analysts, the price may drop until reaching between USD 15,000 and USD 10,000. In addition, the buy wall at USD 18,000 may disappear and become a bullish trap.
The moving average convergence divergence (MACD) oscillator is another metric to watch in the long term. It became deeply oversold when the price of Bitcoin dropped to USD 17,600 but remains in untested territory.
Although some traders think there might be an optimistic change, cryptocurrencies still face macro challenges. While the price of Bitcoin shows weekly highs and lows, the RSI and MACD move in the opposite direction, a bullish divergence.
Since the convergence of various indicators suggests an undervalued Bitcoin, the bottom does not seem imminent. If BTC dropped to USD 10,000, it would lose 48% of its value, close to USD 20,000.
The MVRV Z-Score Highlights the Oscillation between Fear and Greed
David Puell, the creator of the MVRV Z-Score, says this metric highlights the oscillation between fear and greed in the price cycle. He believes that the brilliance of realized value is that it significantly dampens the emotions of the crowd.
If the market value of Bitcoin is considerably higher than its actual value, the metric enters the red area. When in the green zone, it indicates that BTC is below its realized price while the market may be about to bottom out.
Regarding the price of Bitcoin, the 0.127 MVRV Z-Score is in the same range as previous multi-year lows and cycle bottoms. On-chain data and the above technical analysis indicators suggest an undervalued BTC is in an ideal zone for a long position.
By Alexander Salazar
