Bitcoin Price is Getting Severely Overbought: Is it a Buy?

Bitcoin price made a spectacular comeback in the past few days as investors reflect on encouraging data from the United States. The BTC/USD exchange rate surged to a high of $21,365, the highest point since November. It has risen by more than 35% from the lowest level in November. So, is the tide turning?

Will the Fed pivot?

Bitcoin and other global assets continued surging as investors reacted to the latest American economic data. Data published last week revealed that the American consumer inflation inched downward in December. It dropped to 6.5% in December, the sixth straight month of decline.

A week earlier, data by the Bureau of Labor Statistics (BLS) showed that the country’s unemployment rate dropped to 3.5% in December. In the same period, wage growth increased by 4.7%, lower than the previous month’s 5.2%. A decline in wage inflation is a positive sign for Bitcoin and other financial assets because of the Federal Reserve.

The Federal Reserve has been in a strong tightening phase in the past few months as it continues its battle against inflation. Its goal is to soften the economy and prevent a hard landing. Such a situation will happen when wage growth eases. 

Therefore, Bitcoin has risen because of the rising chances that the Fed will start to pivot. Historically, Bitcoin and other cryptocurrencies rises when the Fed turns dovish. It rose to an all-time high of $67,000 in 2021 as the Fed maintained rates low.

Bitcoin price has also risen because of the rising inflows in Binance and other exchanges. Binance, the biggest exchange in the world, has seen its inflows jump by over $1.8 billion in the past 30 days. Other exchanges like Kucoin, Bybit, Gate.io, and Deribit have seen inflows rise.

Bitcoin price prediction

The daily chart shows that the BTC price has been in a strong bullish trend in the past few weeks. It has risen in the past 14 days straight. The coin has jumped above the key resistance level at $18,398, the highest point on December 14. It has moved above the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved to the overbought level. 

Therefore, the coin will likely continue rising as buyers target the key resistance level at $23,000. A drop below the support at $20,000 will invalidate the bullish view.