Bitcoin has seen a significant 36% drawdown from its all-time highs, causing a notable shift in market sentiment. The relative strength index (RSI) has plummeted to levels not observed since early 2023, suggesting a potential bottom for the cryptocurrency. As traders analyze this data, some are starting to wonder if a price reversal is on the horizon.

Currently, Bitcoin's RSI is flashing 'oversold' signals, a development that traders often interpret as a precursor to a price bounce. The RSI fell from local highs of 64 in September down to 35, marking a stark contrast to the highs seen just a few months ago. This drop signifies a crucial moment for traders, as historically, when the RSI reaches such low levels, it typically indicates that the asset may be undervalued.

Analysts are weighing in on the significance of this drop. Jelle, a market analyst, noted that the current RSI levels are reminiscent of earlier this year when Bitcoin traded between $15,500 and $17,000. Jelle emphasized that this is a critical juncture, advising traders to remain vigilant: "Either we’re close to a bottom, or we’re in for a lot more pain soon enough."

The weekly RSI serves as a crucial tool for traders, indicating the strength of a trend. It features three key levels: the 30 oversold boundary, the 50 midpoint, and the 70 overbought threshold. A cross above or below these levels can provide traders with insightful hints about potential future movements.

Mister Crypto, another trader, echoed similar sentiments, stating, "Bitcoin looks the most oversold it’s been all cycle. A bounce is very likely." However, not all traders are convinced that a relief bounce is imminent. Lark Davis, a popular YouTuber, pointed out historical patterns where Bitcoin continued to decline even after reaching oversold conditions. In 2018, Bitcoin dropped another 49% after hitting similar RSI levels, while a subsequent decline in 2022 saw a further 58% drop. Davis warned that these bottoms can take longer to form and can entail more pain than anticipated.

Adding to the complexity, data from CryptoQuant indicates that Bitcoin is currently undervalued at $87,000. The network value-to-transaction (NVT) ratio, which compares market capitalization to actual network usage, shows that Bitcoin may be mispriced at its current level. The NVT Golden Cross recently reached a historically low level near -0.6, a zone often associated with structural undervaluation.

CryptoQuant analyst MorenoDV_ explained that while the NVT has slightly improved to -0.32, it still remains in negative territory, suggesting that Bitcoin is priced conservatively relative to its network utility. This scenario typically points towards a market transitioning from deep undervaluation to a more balanced state, historically linked to accumulation and healthier price discovery.

Despite the current market conditions, Bitcoin's price is showing signs of recovery, although it remains discounted in relation to its usage. Analyst CryptosRus commented on this situation, noting that such a setup has occurred only a handful of times in Bitcoin’s history. The last two instances when the NVT Golden Cross reached similar levels were in April 2025 and at the bottom of the 2022 bear market, leading to impressive rallies of 60% and 350%, respectively.

However, as with any investment, the landscape remains fraught with risks. This article does not constitute investment advice. Each trading decision should be preceded by thorough research. It’s essential for traders to remain aware of the inherent risks associated with cryptocurrency trading.

As the market continues to evolve, the implications of the current RSI levels and NVT ratio will be closely monitored by analysts and traders alike. While the potential for a price bounce exists, the uncertainty in the market makes it imperative for participants to stay informed and prepared for various outcomes.