Definition ∞ Overbought conditions describe a state where an asset’s price has risen rapidly and is considered likely to experience a price correction. This technical analysis term indicates that buying pressure has been exceptionally strong, pushing the asset’s price above its intrinsic value or historical trading range. Indicators like the Relative Strength Index (RSI) often signal overbought conditions when they reach extreme levels. It suggests that the asset is due for a pullback or consolidation as sellers enter the market.
Context ∞ Overbought conditions are a regular feature in cryptocurrency market commentary and news, especially during strong bull runs. Traders use this concept to assess market sentiment and identify potential reversal points for digital assets. Discussions often revolve around whether current price levels are sustainable or if a correction is imminent, influencing short-term trading strategies.
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