Bitcoin weekly RSI hits the third lowest in history, is a market sentiment bottom signal already emerging?

As of March 5, 2026, according to Gate market data, Bitcoin’s price has rebounded to around $72,500, with a 24-hour increase of over 8%. Just a few days ago, Bitcoin experienced one of its longest consecutive monthly declines in history, and the market was filled with pessimism. However, as several key technical indicators have entered extreme zones, analysts are increasingly voicing: current levels may not require panic selling.

This judgment is not based on emotional “bottom-fishing” calls but on multiple verifiable structural data points. From the Relative Strength Index (RSI) to perpetual contract funding rates, several quantitative indicators are reaching or even breaking through historical extremes. The common implication is: selling pressure may have entered exhaustion, and the market is searching for a new equilibrium.

Background and Timeline of the Current Sell-off

To understand the current technical signals, it’s necessary to trace back the full chain of this decline. Since hitting a record high in October 2025, Bitcoin entered a prolonged downtrend. By the end of February 2026, Bitcoin had closed lower for five consecutive months, with six straight weeks of decline on the weekly chart — one of the longest downward cycles in its history.

The main drivers of the sell-off come from two aspects. First, changes in long-term holder supply. Data shows that in Q4 2025, the supply held for over six months decreased significantly, indicating some long-term investors are taking profits or cutting losses. Second, outflows of institutional funds. During this period, investors via ETFs have reduced their holdings by nearly 100,000 BTC, and CME Bitcoin futures open interest dropped to a two-year low. Notably, the pressure of these outflows has begun to slow markedly from late February to early March.

Meanwhile, the macro environment is also shifting. Tensions in the Middle East escalated, with the US and Israel conducting airstrikes on Iran, causing turbulence in global markets. Traditional safe-haven assets like gold were temporarily pressured, but Bitcoin, after brief volatility, showed relative resilience.

Data and Structural Analysis: Quantitative Evidence of Oversold Conditions

The current “oversold” assessment is based on multiple independent data dimensions, forming a corroborative chain of evidence.

The most closely watched indicator is Bitcoin’s weekly RSI. This measures the speed and magnitude of price changes; RSI below 30 is generally considered oversold. During this decline, Bitcoin’s weekly RSI dropped as low as 26.84, the third-lowest level in history. The extremity of this figure is notable because the previous two times RSI was at similar levels, it marked important market bottoms.

Derivatives markets provide more sensitive real-time sentiment indicators. The 30-day average funding rate for Bitcoin perpetual contracts recently turned negative — only the 10th time since 2018. Negative funding rates mean short positions pay longs, indicating a dominant demand for shorting. Historically, periods of deep negative funding rates often precede more positive returns. Research by K33 shows that during similar periods, Bitcoin’s subsequent 30-day average return was about 13%, and over 180 days, it rose to 101%.

Options markets also reflect defensive sentiment. Investors are paying high premiums for puts, increasing the cost of hedging against price declines. This extreme consensus of pessimism, from a contrarian perspective, may serve as an early signal that the market is about to turn.

Another structural change is in spot ETF fund flows. After months of outflows, US Bitcoin spot ETFs have recorded nearly $700 million in net inflows so far in March. The two consecutive days of inflows this week contrast sharply with the previous four months of steady outflows. The return of institutional funds provides marginal buying support.

Sentiment Analysis: Optimism and Caution Coexist

Current market sentiment shows clear divergence between bullish and bearish views, which is typical during a transition phase.

The optimistic camp’s core logic relies on the extremity of technical indicators and potential shifts in supply and demand. Research firm K33 states that at current levels, there’s no convincing reason to sell Bitcoin; the risk-reward profile favors accumulation. Their lead analyst notes that the extreme pessimism reflected in derivatives markets is often a contrarian indicator — “If you want to make mistakes, follow the crowd.” Clear Street analysts believe that recent developments — regulatory clarity, infrastructure integration, ongoing institutional entry — could mark a turning point, potentially ending the bear market and triggering a new bull phase.

The cautious side’s concerns mainly focus on macro liquidity and technical resistance levels. The Federal Reserve’s low probability of rate cuts in March, combined with high interest rates, continues to suppress risk assets. Technically, Bitcoin faces strong resistance around $75,000, an area with significant trapped longs, making a breakout difficult. Some traders warn that this rapid rally could be a “bull trap” or “dead cat bounce,” with the risk of reversal and sharp decline after chasing the rally. Arthur Hayes, co-founder of BitMEX, also believes Bitcoin has not yet decoupled from US tech stocks, and patience may be the safer approach.

Narrative Authenticity: From “Safe-Haven Asset” to “Liquidity Amplifier”

A noteworthy shift in narrative during this rebound is Bitcoin’s relationship with geopolitical risks. Over the past week, amid rising tensions in the Middle East, Bitcoin did not surge as some expected based on its “safe-haven” reputation. Instead, it exhibited volatility similar to risk assets, though its declines were smaller than some traditional markets, and at times even outperformed gold.

A more explanatory narrative is emerging: Bitcoin may not be a traditional “safe-haven asset,” but rather a “liquidity expectation amplifier.” When macro liquidity expectations change, Bitcoin tends to react more strongly. In the context of geopolitical conflicts potentially triggering global economic turbulence and prompting central banks to revert to easing, Bitcoin could benefit from this “liquidity pulse.”

Meanwhile, positive regulatory developments are reshaping the long-term narrative. Trump publicly urged Congress to expedite the passage of the CLARITY Act, which aims to clarify SEC and CFTC regulatory authority over crypto. Kraken’s banking subsidiary received approval for a Federal Reserve master account, allowing direct access to Fed payment systems. These infrastructural advances are gradually integrating crypto assets into the traditional financial system.

Industry Impact Analysis

The current technical turning point could have structural effects across multiple layers of the crypto industry.

For miners, price stabilization helps ease ongoing cash flow pressures. During previous declines, some miners were forced to sell Bitcoin to cover operational costs. If prices stabilize or rise further, selling pressure from miners will decrease significantly, improving industry health.

For ETF investors, the reversal of fund flows could create a positive feedback loop. Continuous inflows may restore market sentiment and attract more institutional allocations. As a regulated channel, ETF fund flows are an important indicator of institutional interest.

For derivatives traders, the end of negative funding rates and the decline in implied volatility suggest the market is recovering from extreme panic. A more normalized trading environment could attract more neutral strategies and market makers.

Multi-Scenario Evolution

Based on current technical indicators and macro conditions, Bitcoin’s price could evolve along three main scenarios over the coming months:

1. Neutral (higher probability): Bitcoin fluctuates broadly between $68,000 and $100,000. High interest rates continue to suppress risk assets, with capital flowing in and out, and regulatory progress slower than expected. The market needs time to digest overhead longs.

2. Optimistic: Bitcoin breaks above $75,000, testing $84,000 or even challenging previous highs. Conditions include: Fed signals rate cuts, ETF inflows remain strong, US crypto legislation passes smoothly, and geopolitical tensions ease. Extreme oversold signals in technicals will underpin the rally.

3. Pessimistic: If the Fed turns hawkish again, ETF flows reverse, or regulation tightens, Bitcoin could fall below $68,000, testing $63,000 or even $60,000. However, even in this scenario, the extreme levels of technical indicators suggest limited downside potential.

Conclusion

In summary, Bitcoin’s weekly RSI has entered extreme historical zones, perpetual contract funding rates have turned negative, long-term holder selling pressure has eased, and ETF flows have reversed. Multiple independent indicators point to a common conclusion: the market may be approaching exhaustion of selling pressure. The highly aligned pessimism, viewed contrarily, can be a valuable early warning signal.

It’s important to note that technical bottoms do not mean an immediate reversal; historically, bottoms often take time to form. The market may still undergo consolidation and bottoming processes, awaiting clearer macro signals. However, for panic selling, the risk-reward profile at current levels has substantively changed. As K33’s research concludes: “The worst may be over; now is the time to wait.”