Scott Melker takes a closer look at the RSI indicator
Melker is known for using the relative strength index (RSI) indicator, usually in the 4-hour and 6-hour candlestick chart timeframes to identify potential trend reversal. The RSI is an indicator used to assess whether an asset is overbought or oversold if the RSI is above 75, the asset is overbought, and if below 30, it is oversold.
Technically, Melker explained that Bitcoin has not yet been oversold in at least 6 hours.
However, Melker said the bullish trend with the RSI was confirmed. The 12-hour candlestick chart will soon confirm the same structure, which will be positive for BTC in the near term. Melker wrote:
The 6-hour bullish wave was confirmed with the RSI. The 12-hour chart will be confirmed in 40 minutes. We had little divs of these in the lower timeframes yesterday. None of them reached oversold. It can still drop and create larger div.
Why did the Bitcoin aid rally happen?
There are also root causes for a short-term Bitcoin aid rally to happen.
First, the Bitcoin premium on Coinbase increased significantly yesterday January 27, reaching $ 200 at one point. While the bitcoin price naturally trades slightly higher than normal on Coinbase, this shows that high net worth investors are aggressively “accumulating decline”.
This trend also explains the rapid reversal trend, where Bitcoin dropped below $ 30,000 and rose to about $ 31,000 within a few hours. The whales are probably trying to protect the $ 30,000 support area from breaking, as a definite drop below $ 30,000 could result in a more complex correction for BTC.