Bitcoin's Relative Strength Index Against Gold Plunges to 22, Signaling 3-Year Oversold Extreme

CoinDesk reported that Bitcoin's 14-day Relative Strength Index (RSI) against gold has dropped to 22, marking its most oversold level in three years. This significant technical indicator, highlighted in the "Chart of the Day" presented by Crypto.com, suggests intense selling pressure on the cryptocurrency relative to the precious metal. The report, brought by Jenn Sanasie, indicates a potential undervaluation of Bitcoin compared to gold.

The Relative Strength Index is a momentum oscillator utilized by technical analysts to measure the speed and change of price movements. A reading below 30 typically indicates that an asset is oversold, hinting at potential undervaluation or an impending price reversal. Bitcoin's current RSI of 22 against gold has not been observed since November 2022, signaling an extreme condition.

Despite this oversold signal, the Bitcoin-gold ratio remains in a pronounced downtrend, characterized by a recently confirmed "death cross" of the 50- and 200-day simple moving averages. This bearish technical backdrop suggests that while oversold, a sustained recovery for Bitcoin against gold may require further confirmation. The overall market sentiment for Bitcoin is currently bearish, with the Fear & Greed index registering 22, indicating "extreme fear" among investors.

According to CoinDesk analyst Omkar Godbole, an oversold RSI alone does not guarantee an immediate bullish reversal for BTC against gold. He emphasized that confirmation from other technical indicators, such as signs of downtrend exhaustion or increased buying volume, is crucial. Without these supporting signals, the oversold status may persist during strong downward trends, meaning the price could continue falling despite the low RSI level.

Bitcoin's price has also been trading below key moving averages, with some analysts eyeing a potential test of levels below $100,000. Historically, similar RSI lows have sometimes preceded significant rebounds for Bitcoin against the dollar, but traders are advised to exercise caution. This current divergence highlights Bitcoin's underperformance against gold, which has seen strength amid inflation fears and geopolitical tensions.