Bitcoin dropped from around $65,000 to $63,300 on Thursday, a day after the Federal Reserve's latest policy announcement. The move pushed the Relative Strength Index (RSI) to an oversold reading of 21 — a level that has historically preceded rallies. At the same time, Bitcoin's Bollinger Bands on a 3-day scale have started squeezing, a pattern that often signals a big price swing is coming.
The FOMC effect
The sell-off followed the Federal Open Market Committee's July 29 meeting. Each FOMC announcement this year has been followed by a Bitcoin decline, and Thursday's drop continued that streak. The exact trigger isn't clear from the price action alone, but the pattern has been consistent: rates decision, then red candles.
Bollinger Bands history
The current Bollinger Bands squeeze on the 3-day chart is the kind of setup that has preceded major moves in the past. In mid-March, a similar squeeze on the monthly chart preceded a drop from nearly $75,000 to around $65,000. In early May last year, a squeeze on the same timeframe preceded a rally from below $95,000 to above $110,000. The direction this time is anyone's guess, but the volatility is likely coming.
Oversold RSI
The RSI falling to 21 is notable. The indicator ranges from 0 to 100, and readings above 70 warn of a potential correction. Below 30 is considered oversold, and 21 is deep in that territory. Many traders see that as a bullish buying opportunity — though it's not a guarantee. The last time Bitcoin's RSI was this low, it bounced hard. But the broader macro backdrop is different now.
The cycle's bottom hasn't arrived yet, with predictions of a drop as low as $39,000 before the next bull run. That would be a brutal move from current levels. The Bollinger Bands squeeze could break either way, and the FOMC hangover might not be over. For now, the market is waiting to see which way the bands pop.
