Relative Strength Index
The RSI indicator is one of the most popular tools used by traders for determining the actual trend's strength, stability and the possibility of a reversal. The indicator is also being used to determine divergences on the market that allow investors to see a potential reversal before it actually happens.
In order to determine if the asset is oversold or overbought, traders use the indicator's scale with values from 0 to 100. Whenever an asset enters the indicator's zone above 70, the asset is being marked as overbought and is more likely to retrace down.
Whenever the RSI shows a value below 30, the asset is considered oversold and is more likely to retrace up once the buying pressure appears.
What RSI shows on Ethereum
According to the indicator’s data on Ethereum's four-hour chart, the asset has entered the extremely oversold boundary by moving below values of 30. The last time RSI reached such close values for the same asset was in May-July during the global cryptocurrency market correction which sent Ethereum below $2,000.
Previous attempts have "failed successfully," which resulted in a strong recovery almost every time and formed local bottoms. This time, RSI is reaching values below 30 for the eighth time while dropping below it in March 2020.
At press time, Ethereum is trading at $3,683 after losing 10% of its value during the last two days of trading. Ether has retraced by more than 23% since reaching its ATH of $4,870 back in Nov. 10.