Is a surge in the market brewing? Technical indicators: Bitcoin enters the "third-largest oversold zone in history"

Amidst the soaring bearish momentum and a wave of large-scale leveraged liquidations, Bitcoin briefly dropped to around $60,255 this morning (6th). However, just as the market was filled with despair and investor confidence was collapsing, some technical indicators suggested that Bitcoin might not only “bounce back from the depths” but could even experience a “violent upward surge.” The momentum indicator highly regarded by traders for assessing whether an asset is overheated or oversold—the “Relative Strength Index (RSI)”—showed that Bitcoin’s daily RSI briefly dropped to 17.6 (with an index range of 0 to 100) on Thursday, officially entering the “extreme oversold zone.” Looking back at the years when Bitcoin experienced significant corrections, the daily RSI has only fallen below this level twice: once during the global market crash amid the COVID-19 pandemic in 2020, when the RSI dropped to 15.6; and another time at the bottom of the 2018 bear market, when the RSI briefly dipped to 9.5.

Source: TradingView

What makes this indicator so encouraging is that historical data shows that when RSI enters such extreme zones, it often marks a period when the market rewards “bottom fishers” with substantial gains. Today’s decline is undoubtedly a “massacre.” According to CoinGlass data, the total forced liquidation amount in the cryptocurrency derivatives market exceeded $2.58 billion in a single day, indicating that market sentiment has entered an extreme phase of panic and deleveraging. In such an environment, intuition often drives investors to “sell on weakness,” but for experienced traders, extreme oversold conditions often mean that much of the risk has already been priced in, making it an excellent opportunity to reassess entry points.