Definition ∞ Oversold conditions describe a market state where a digital asset’s price has fallen excessively and is considered undervalued by technical indicators. This technical analysis term suggests that selling pressure has been unusually strong or prolonged, pushing the asset’s price significantly below its intrinsic value or recent trading range. Indicators such as the Relative Strength Index or Stochastic Oscillator are commonly used to identify these situations, signaling a potential reversal or rebound in price. It implies that a significant portion of market participants who wished to sell have already done so.
Context ∞ Reports of oversold conditions frequently appear in cryptocurrency market analysis, guiding traders and investors in identifying potential buying opportunities or predicting short-term price corrections. While an oversold reading does not guarantee an immediate price increase, it often precedes a stabilization or upward movement as buying interest returns. Understanding these conditions helps market participants interpret price action and formulate trading strategies.
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