Is the continuous blunting of the RSI indicator after breaking through 70 a continuation of overbought or an imminent reversal?

Understanding the RSI Indicator and Overbought Thresholds

The Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price movements on a scale from 0 to 100. It is widely used in cryptocurrency technical analysis to identify potential overbought or oversold conditions. Traditionally, an RSI value above 70 is interpreted as overbought, suggesting that the asset may be overvalued and due for a pullback. Conversely, an RSI below 30 indicates oversold conditions. However, in strong trending markets—particularly in volatile crypto assets—RSI can remain in overbought territory for extended periods without immediate reversal.

When the RSI breaks above 70 and continues to rise or remains elevated, it does not automatically signal a reversal. Instead, it may reflect strong bullish momentum. The key distinction lies in whether the price is in a sustained uptrend, where overbought readings can persist. In such cases, the RSI may show a series of higher highs while price makes higher highs, reinforcing the trend rather than warning of exhaustion.

Interpreting RSI Blunting After Crossing 70

'Blunting' refers to the RSI flattening or showing reduced momentum after crossing into overbought territory. This behavior can be observed when the RSI reaches 70 and then fails to climb significantly higher, instead moving sideways or forming lower peaks while the price continues upward. This divergence can be a subtle signal of weakening momentum.

In this scenario, traders analyze whether the price and RSI are in alignment. If the price is making new highs but the RSI is forming lower highs, this constitutes a bearish divergence. Such a pattern suggests that although buyers are still pushing the price up, the underlying momentum is fading. In the context of cryptocurrency, where sentiment and macro factors heavily influence price, this divergence may precede a correction or consolidation phase.

However, blunting alone is not a definitive reversal signal. In strong bull runs—such as those seen in Bitcoin during institutional inflow phases—RSI can remain above 70 for weeks. The critical factor is the context of the broader trend and volume. High trading volume accompanying price increases supports the continuation of the trend, even with a blunted RSI.

Distinguishing Between Trend Continuation and Reversal Signals

To determine whether a blunted RSI above 70 indicates continuation or reversal, traders must incorporate additional technical tools:

• Price action analysis: Look for higher lows and breakout patterns on the candlestick chart. If price maintains clear support levels and breaks through resistance, the trend is likely ongoing.
• Volume confirmation: Increasing volume on up days reinforces bullish sentiment. A blunted RSI with declining volume may suggest waning interest.
• Moving averages: Monitor whether the price remains above key moving averages like the 50-day or 200-day EMA. Staying above these levels supports trend continuation.
• Support and resistance levels: If the asset is approaching a historical resistance zone while the RSI is blunted, the probability of a reversal increases.

For example, if Ethereum approaches $4,000—a psychologically significant level—and the RSI is above 70 but showing signs of blunting, this confluence increases the likelihood of a pullback. Conversely, if it breaks $4,000 on high volume with RSI stabilizing near 75, the move may continue.

Using RSI Divergence as a Tactical Tool

Bearish RSI divergence occurs when price makes a higher high, but RSI makes a lower high. This is a powerful signal when observed in overbought conditions. To identify this:

• Plot the RSI indicator on your trading chart using platforms like TradingView or Binance’s built-in charting tools.
• Mark the most recent price peak and the corresponding RSI peak.
• Compare this with the next price high: if price exceeds the prior high but RSI does not, divergence is present.
• Confirm with candlestick patterns such as bearish engulfing or shooting star near resistance.

In cryptocurrency trading, divergence should not be acted upon in isolation. Combine it with order book analysis on exchanges. For instance, if a large number of limit sell orders cluster near the current price and RSI shows divergence, the odds of a reversal rise.

Traders can also use RSI failure swings—a pattern where RSI breaks above 70, pulls back below 70, then retests 70 but fails to surpass it—as a confirmation of weakening momentum. This pattern, when aligned with price rejection at resistance, strengthens the reversal case.

Practical Steps to Monitor RSI Behavior in Crypto Markets

To effectively track RSI dynamics in real time:

• Set up custom alerts on TradingView or exchange platforms when RSI crosses above 70 or below 30.
• Use a 14-period RSI as the default, but experiment with shorter periods (e.g., 9) for more sensitivity in fast-moving crypto markets.
• Overlay RSI with Bollinger Bands or MACD to cross-verify signals.
• Apply RSI to multiple timeframes: a blunted RSI on the 4-hour chart may be part of a larger uptrend visible on the daily chart.
• Avoid trading solely on RSI; always consider on-chain data such as exchange inflows or wallet activity for confirmation.

For example, if Solana shows a blunted RSI above 70 on the 6-hour chart but on-chain metrics show increasing wallet addresses and low exchange reserves, the market may still have upward potential despite the technical hesitation.

Common Misinterpretations of RSI in Volatile Markets

A frequent mistake is assuming that RSI above 70 always leads to a reversal. In high-volatility crypto assets, extended overbought conditions are common during FOMO-driven rallies. The RSI can stay above 70 for days during events like mainnet launches or exchange listings.

Another error is ignoring timeframe alignment. A blunted RSI on a 15-minute chart may be noise within a strong daily uptrend. Traders must assess RSI behavior across multiple timeframes to avoid false signals.

Moreover, altcoins often exhibit exaggerated RSI movements due to low liquidity. A sudden pump can spike RSI to 85+ briefly, but without sustained volume, the move lacks follow-through. Evaluating trading volume and order book depth is essential to filter out such anomalies.

Frequently Asked Questions

Can RSI remain above 70 during a healthy bull market?Yes. In strong bullish trends, especially in leading cryptocurrencies like Bitcoin or Ethereum, RSI can stay above 70 for extended periods. This reflects sustained buying pressure rather than imminent reversal. The key is whether price continues to make higher highs on increasing volume.

What is the difference between RSI blunting and RSI divergence?RSI blunting refers to the indicator losing upward momentum after exceeding 70, often flattening or moving sideways. RSI divergence is a specific pattern where price and RSI move in opposite directions—e.g., price up, RSI down. Divergence is a stronger warning signal than blunting alone.

Should I short a cryptocurrency just because RSI is above 70 and blunting?No. Shorting based solely on RSI is risky, especially in trending markets. Always confirm with price structure, volume, and broader market sentiment. A blunted RSI may precede consolidation rather than a sharp reversal.

How does RSI behave during crypto flash crashes?During sudden drops, RSI can plunge from overbought to oversold (below 30) within minutes. This rapid shift reflects panic selling. In such cases, RSI may quickly rebound, indicating a potential bounce, but should be analyzed alongside liquidation data and funding rates.