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The last three months have been great Bitcoin, seeing gains of almost 200% as well as crossing the $200 billion market cap for the first time since January 2018, setting a new yearly high of $11,400 at the same time. Popular trader Alex Kruger has now touched on the possibility that Bitcoin may be in overbought territory.
Is $BTC overbought?
— Alex Krüger (@krugermacro) June 25, 2019
Since 2014, $BTC has traded fully outside the Keltner Channel (2.5/20) with RSI >90 on NINE occasions.
▷ 6/9 times retraced to the open of preceding day in under 20 days (avg 10d).
▷ 1/9 times it took 79 days.
▷ 2/9 times it never retraced (May 2017). pic.twitter.com/nsDzvuoijA
The Keltner Channel is a volatility-based indicator set above and below an exponential moving average. It’s used to identify reversals with channel breakouts and channel direction. In terms of Bitcoin, the fact that it’s only traded a few times outside of the channel suggests that it’s in overbought territory.
Kruger goes on to note that since 2014, Bitcoin has been trading outside the Keltner Channel with an RSI greater than 90 nine times. Of those nine occasions, six have retraced to the open of the preceding day in under 20 days, with an average of 10 days.
One of the nine times saw it take 79 days while twice in May of 2017 it never retraced at all. He continued:
Avg max runup in following 20 days stands at 25%, while avg max drawdown stands at 12.5%. Analysis excludes contiguous days outside the channel. Jun/23 represents the 10th occasion since 2014.
— Alex Krüger (@krugermacro) June 25, 2019
As is generally the case with overbought, expectations are centered around a potential correction in the not too distant future. At the time of writing, Bitcoin is trading at $11,238.57, an increase of 3.37% in the last 24 hours.
BTC/USD chart provided by Tradingview