How to Measure Bitcoin RSI
The Relative Strength Index, RSI, is a measure of how overbought or oversold a market is – but there’s a little more nuance to it than that.
Markets like to breathe. Like the tide going in or out, there’s almost always a pullback after a big move, even if there’s more to come. For example, in an uptrend there will be plenty of times when buyers get too enthusiastic, and profit-takers temporarily drive the price down again.
The Relative Strength Index (RSI) aims to formalise the degree to which the market is overbought or oversold, on any given timeframe. It’s a very common indicator – known as a momentum indicator – available on most charting websites and services. RSI is calculated using a simple formula that looks at gain or loss over a recent time period – usually 14 periods. So, the daily RSI would use 14 days worth of data, while the 1-hour RSI would use 14 hours worth of prices.
1 to 100 score
The result is a single figure, from 0 to 100. A value of 70 or above is generally considered overbought, while 30 or below is oversold. A look at the RSI for bitcoin will show that price can stay above 70 or below 30 on any timeframe. But it also shows that over longer timeframes it takes more to push the price over the overbought/oversold line.
On the weekly bitcoin price chart (click the 1w Interval and select RSI from the Settings), RSI only briefly touched 30 in December 2018, neatly marking the bottom of the bear market. Scrolling back, you’ll see that the last time it touched 30 was the bottom of the last bear market in 2015. So it can be a very useful indicator – in conjunction with other signals, of course.
On the shorter timeframe, RSI can stay above 70 or below 30 for a considerable time. After the spike above $5,000 at the start of April, the daily RSI remained in overbought territory for three weeks, until the Tether-inspired selloff dropped bitcoin’s price by $500 in the space of an hour. And on lower timeframes, RSI can shoot up over 90 or down to 10 – these timeframes are more responsive to large movements, but adjust more quickly too, gently reverting back to the mean of 50 if there is no further movement.