Bitcoin and Ether Rally, Approaching Overbought Levels
Bitcoin (BTC) and ether (ETH) have been on a wild ride over the past week, rallying impressively from technically oversold levels. Both cryptocurrencies have shrugged off concerns around bank failures, inflation, and ETH selling pressure to end the week at the brink of overbought levels. Bitcoin, currently trading at around $26,780, has surged over 30% in the past seven days, with much of its gains occurring since Monday. Meanwhile, ether has climbed about 21% over the same period.
Sudden Reversals Trigger Gains
Both cryptocurrencies made abrupt turns at the technically oversold Relative Strength Index (RSI) mark of 30 on March 11, and their ascent accelerated following assurances by the Federal Deposit Insurance Commission (FDIC) that depositors of Silicon Valley Bank would be made whole. Now, bitcoin and ether show RSIs of 70.7 and 61, respectively, putting them on the verge of overbought readings.
Outlook for Bitcoin and Ether
Historically, bitcoin has continued to perform well even when reaching overbought levels. Data dating back to 2015 shows that bitcoin’s RSI breached 70 on 408 occasions, and its average 30-day performance following an occurrence was a 13% increase. Meanwhile, ether’s average performance was a less impressive 3% return after 30 days, indicating that bitcoin has tended to trend higher when technically overbought, while ETH has been more prone to trimming gains.
Tight Correlation Despite Differences
The two assets remain tightly correlated to each other, suggesting that investors still view them in a similar fashion despite their stark differences in how they’re used. BTC and ETH’s performance ranked them fifth and seventh among cryptocurrencies with a market cap of $1 billion or more.
Other Cryptocurrencies Perform Well Too
STX, the token of the Stacks layer 2 Bitcoin protocol, led the pack with a 75% increase, followed by Immutable X with a 69% increase, both among cryptocurrencies with a market cap of $1 billion or more. All but one of the assets on the list finished the week in positive territory, with LEO being the lone asset to decline over the most recent seven days.
Focus on Interest Rate Decision
Investors will be looking forward to the Federal Open Market Committee’s (FOMC) interest rate decision next Wednesday, which is currently expected to result in a 25-basis point increase. Little significant data is likely to change expectations before the announcement. Investors will be paying special attention to the FOMC’s economic projections, as they will show the reasoning behind the FOMC’s decision. The recent decoupling of cryptocurrencies from traditional financial indexes has been interesting to see, and it will be intriguing to see whether this trend holds next week.
Source: CoinDesk
