Bitcoin Cash Is Oversold, But Here’s How Traders Can Manage Risk

Bitcoin Cash is up more than 30% from its lows so far this year and is almost entering overbought territory. However, BCH enthusiasts who may be worried about missing out still have a chance to catch the boat.

The latest bullish relief may have provided some relief from the bears. However, zooming out reveals that the recent upside is quite small compared to the extent of BCH’s downside.

To put that into perspective, Bitcoin Cash needs at least a 10x move to get back within its previous all-time high (ATH) range.

Everything is still trading below January 2020 levels. This highlights the scale of the sale. It also shows why BCH is still oversold.

It simply means that investors still have a chance for a healthy entry point for the next bullish phase.

While this may be beneficial for long-term HODLers, things are less certain for short-term traders.

Bitcoin Cash’s Short-Term Outlook

BCH’s $130.6 press time price on July 24 is still far from the next resistance zone.

However, it has experienced increased friction after crossing above the 50-day moving average.

Source: TradingView

BCH showed signs of a selloff from June 20 to June 23, and this was supported by some outflows according to MFI.

However, it continues to show an affinity to the upside, but calculations on the chain suggest that whales can expect a cool-down, especially after the recent rally.

However, it is worth noting that BCH is not yet oversold. Therefore, there is a chance that it may continue to rally.

Some of Bitcoin Cash’s metrics already point to a potential downside. For example, the supply of whales has decreased significantly in the last 30 days.

Meanwhile, the MVRV ratio did the opposite by climbing. At press time, it was at its highest level. This means that many traders who bought the dip are in profit.

Source: Sentiment

The price rally despite the whale outflow suggests that bulls were supported by strong retail demand.

But the retail buying pressure may not survive long without support from larger addresses.

Furthermore, 24-hour whale transaction activity and active addresses have dropped significantly over the past four days.

Source: Sentiment

It is uncharacteristic of whales to buy higher, so they will likely wait for another drop in price to buy at a more favorable entry point.

This assumes that retail volume runs out, but many of the buyers in this segment may be long-term investors, thus increasing the floor price.

But there are always ups and downs, and the chances of a wave of R&D pushing and wiping out some of the recent gains are also significantly high.