The altcoin market is known for its volatility, making it enticing for investors looking to capitalize on price movements. However, identifying overvalued and undervalued conditions can be a challenging task. In this article, we will delve into the concept of bullish and bearish divergences in altcoins, as highlighted by the analytics firm Santiment.
The Relative Strength Index (RSI) is a powerful tool used in technical analysis to gauge the momentum of price changes. It measures the speed and magnitude of recent price movements for a specific asset. While the RSI can be examined over any period, we will focus on the 1-day RSI in this analysis.
With an understanding of RSI, we can now explore the altcoins that currently exhibit bullish and bearish divergences. Santiment has identified several altcoins displaying overvalued conditions based on their high 1-day RSI levels.
Maker (MKR), Venus (vBNB), and Sei (SEI) are three altcoins that have recently seen their RSI levels reaching alarming heights. Specifically, vBNB has a value of 74.6, SEI stands at 72.4, and MKR records 75. These readings suggest an overheated market, indicating a potential top formation.
MKR, in particular, has experienced an impressive rally, registering gains of over 30% in the past few weeks. However, the high RSI levels for MKR, vBNB, and SEI may be an indication that their upward momentum is starting to lose steam.
While some altcoins are overvalued, others show signs of being undervalued. Elrond (ELGD), Arweave (AR), and Bonk (BONK) fall into this category, as their 1-day RSI levels suggest underpriced conditions.
ELGD and AR, with RSI readings of 22.6 and 29, respectively, are firmly positioned within the undervalued zone. On the other hand, BONK hovers slightly above this area with an RSI value of 31. Santiment notes that these coins have separated from the rest of the market, potentially indicating a bullish divergence.
Altcoins exhibiting bullish divergences, such as BONK, may witness price rises as they try to catch up with the overall market trend. Conversely, altcoins like MKR may experience a correction to align themselves with the performance of other assets in the market.
Bonk, in particular, has faced a challenging period recently, with a downward trajectory in its price. However, there may be signs of a potential turnaround, as the coin’s value surged by over 22% within the past 24 hours. This increase in price suggests a shift in investor sentiment, raising hopes for a bullish trend.
Understanding the concept of bullish and bearish divergences in altcoins is crucial for investors seeking profitable opportunities. Santiment’s analysis of altcoins based on their 1-day RSI levels provides insights into overvalued and undervalued conditions.
While altcoins like MKR, vBNB, and SEI currently exhibit signs of overheating, altcoins such as ELGD, AR, and BONK appear undervalued. These divergences have the potential to result in price corrections or rises, aligning the performance of the altcoins with the broader market trend.
As with any investment decision, it is essential to conduct thorough research and exercise caution. Altcoin investments come with inherent risks, and individual investors should be aware of the volatility of the market.
