Bitcoin's 2-week Relative Strength Index (RSI) has reached extreme oversold levels, a technical signal that has historically preceded major price rebounds, presenting a potential buying opportunity for long-term holders. The momentum oscillator, which indicates whether an asset is overbought or oversold, has dipped below 30, a level rarely seen, suggesting panic selling may be exhausting and Bitcoin is undervalued based on historical momentum.
However, this optimistic technical signal is contrasted by a complex and risky market structure. After a nearly 15% drop that briefly touched the $60,000 zone, Bitcoin rebounded over 11%, reviving the 'buy-the-dip' narrative. Yet, analysis reveals a bear flag pattern on the 4-hour chart, which, if the lower trendline breaks, could signal a further 25% downside move targeting the $48,000–$49,000 zone.
Market data shows rising leverage and fragile optimism. Following the rebound, more than $540 million in new long positions were built on Binance alone, indicating traders are using heavy leverage to bet the bottom is in—a behavior that has preceded major liquidations in past downturns. Concurrently, Bitcoin supply on exchanges fell from approximately 1.23 million BTC to 1.22 million BTC between February 5 and 6, suggesting coins are being withdrawn in anticipation of higher prices.
A critical divergence emerges between short-term traders and long-term holders. While short-term sentiment turns bullish, long-term holders (investors holding for over one year) have been net sellers. The Long-Term Holder Net Position Change metric showed net selling of roughly 246,000 BTC by February 5, a dramatic increase from about 2,300 BTC on January 6. This nearly 10,500% increase in distribution in one month indicates the most conviction-driven investors are reducing exposure.
The market's focus is now on key support levels. The long-term holder realized price—the average acquisition cost for these investors—sits near $40,260. Historically, Bitcoin approaching or falling below this level signals deep market stress and can accelerate capitulation. Other critical technical supports are at $53,350 and $48,800. For the bearish structure to be invalidated, Bitcoin needs to reclaim $69,510 and then move above $73,320 on a sustained basis.
Analysts caution that with a fragile chart pattern, rising leverage, and continued selling by long-term holders, the current rebound lacks structural confirmation. This convergence of signals suggests the market may not have completed its full deleveraging phase, leaving buy-the-dip strategies exposed to sharp reversals despite the oversold RSI hinting at a potential long-term accumulation window.
