Altcoins are alternative coins to Bitcoin, and we will be discussing why it’s best to buy these coins when they are oversold and four altcoins you should bag now that they are oversold in other to get good returns from their next short-term pump.
You will barely make serious returns on altcoins if you keep buying high and selling lows, so follow me as I share with you these simple steps of knowing when to buy altcoins and also some oversold altcoins you could jump on.
We may want to understand Altcoins before we proceed.
Altcoins is the short form for “Alternative coins” and they refer to all other Cryptocurrencies that came into existence after Bitcoin.
Historic data has shown us that cryptocurrencies move in circles and part of these circles are the bullish and bearish circles, meaning there are particular seasons especially after Bitcoin halving when we notice a price surge across altcoins and also short-term bullish and bearish periods on certain coins when they have either been overbought or oversold.
How Do We Know When Altcoins Have Been Overbought or Oversold?
As a newbie, I lost a lot of money to the phrase “buy the deep” because I jumped on any altcoin that dumps above 12% in twenty hours because if that wasn’t deep, then I wonder what was! But as I continued to study and grow in the cryptocurrency space I discovered what I am about to share with you in this blog.
With the help of a simple technical analysis tool called Relative Strength Index mixed with market structure, you can tell when the market is overbought and oversold.
To buy lows and make good returns on altcoins, you have to buy when the market is oversold and sellers are exhausted, and the RSI makes it easy to know when to buy.
Relative Strength Index (RSI)
The Relative Strength Index is a popular technical indicator used to measure the speed and change of price movements. RSI is a mathematical oscillator that oscillates between 0 and 100 and it is displayed alongside the price chart of the asset that is been analyzed as a line chart.
Interpretation of RSI
Aside from showing when the market is overbought or oversold, the RSI also serves as a divergence and momentum confirmation tool.
A sound understanding of overbought and oversold market conditions is key in trading and investing especially as a beginner.
Imagine you are in a region where a particular item is very popular, and everyone wants to have it. The demand for that item becomes so high that it becomes very expensive because people are willing to pay a premium for it.
In the cryptocurrency market, Altcoins become overbought when the price rises too quickly due to excessive buying, potential reversal, or correction.
RSI is considered overbought when it rises above 70, meaning the price rose too fast and most traders consider selling after considering other market conditions.
Key points about an overbought market:
1. Prices have risen significantly, often in a short period.
2. Investors and traders are enthusiastic and buying heavily.
3. It may be a sign that the asset’s price could reverse or correct lower in the near future.
Now, picture that same region where a particular item has fallen to the point that people are not interested in buying it anymore. The price has dumped significantly because sellers are eager to get rid of it even at a cheaper price.
Altcoins are oversold when the price has declined sharply due to excessive selling, and may be considered undervalued or too cheap relative to its current value.
RSI is considered oversold when it falls below 30, which suggests that a particular coin’s price may have fallen too fast and investors consider buying an oversold market.
Key points about an oversold market:
1. Prices have fallen significantly, often in a short period.
2. Investors and traders are pessimistic and selling heavily.
3. It may be a sign that Altcon’s price could reverse or bounce back higher in the near future.
Top 4 Oversold Altcoins You Should Be Buying
Here are five oversold altcoins you can want to add to your buy list based on data from RSI and chart patterns.
1. Arbitrum (ARB):
Ranking number 42 on CoinMaeketCap based on a market capitalization of approximately $1 billion, ARB price has declined by almost 59% from its all-time high.
RSI shows Arbitrum’s price at an oversold condition of 30, and market structure on a daily timeframe has also confirmed a steady decline with lower lows but a short-term bullrun is anticipated to correct the price.
This 33% pump should form a lower high for ARB.
2. ApeCoin (APE):
Apecoin has been dumped by almost 98% from its all-time high with a $416 million market capitalization and an oversold RSI of 20.
All indicators are pointing to the fact that sellers are exhausted and APE is preparing for a correctional pump.
3. Internet Computer (ICP):
Leading among the top losers on CoinMarketCap and also trading with a Relative Strenght Index of 24 at press time, ICP is set to pump its way to a lower high.
4. Klaytn (KLAY):
Even with their focus on public chain on metaverse, and gamefi, sellers still dumped KLAY and its RSI is 21 meaning that public interest in KLAY somehow dropped.
I will be anticipating a pump to form a lower high.
Whenever the market is oversold, there is always a good buying opportunity that comes with a short-term pump which in some cases are just reversals or corrections. However, the Relative Strength Index is a technical analysis tool that helps traders and investors take advantage of an oversold or overbought market mixed with the right market structure, price action, and other conditions.
The top four oversold Altcoins mentioned in this blog were oversold at press time so it is important you check the charts and also consult your licensed financial adviser before investing in Altcoins.
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DISCLAIMER: Cryptocurrency is very volatile and all the information on this blog is not financial advice so make sure you consult your licensed financial advisor before making any investment decision.