When RSI Crosses 70, How Often Does It Keep Climbing? S&P 500 and Bitcoin Strategies
The Relative Strength Index (RSI) is one of the most Googled indicators in trading. “RSI 70” is often treated as a sell signal—yet crypto traders loves to fade that narrative. We quantified who is right by running two rapid-fire backtests on:
- Bitcoin (BTC-USD) daily closes from inception until today
- S&P 500 (SPY ETF) daily closes from inception until today
Both markets were tested with ultra-short RSIs (2-day and 5-day) to capture immediate momentum. For Bitcoin, a reading of 70 leads in most cases to further gain, while the opposite is true for the S&P 500.
Related reading: –Top trading indicators
Key takeaways
- Bitcoin: A short-term momentum edge appears when the 2- or 5-day RSI first breaks above 70. Holding for ~8 trading days after the signal produced the strongest average gain (≈ 2.1 % with a 2-day RSI, ≈ 3 % with a 5-day RSI).
- S&P 500: The same setup delivered flat to negative returns, confirming equities’ well-known mean-reversion bias when RSI reaches overbought territory.
- Take-away: Momentum works for Bitcoin, but stocks tend to snap back. Tailor your strategy—and your risk management—to the asset class.
Why Study the RSI-70 Threshold?
The Relative Strength Index (RSI) is one of the most Googled indicators in trading. “RSI 70” is often treated as a sell signal. We quantified who is right by running two backtests on:
- Bitcoin (BTC-USD) daily closes
- S&P 500 (SPY ETF) daily closes
Data & Methodology
| Parameter | Settings |
|---|---|
| RSI lengths | 2-day and 5-day |
| Entry rule | Enter the same day at the close when RSI closes > 70 |
| Exit rule | Time-based: sell after N trading days (1–10) |
| Period tested | Inception until today |
| Transaction costs | Ignored (tight spreads on BTC perpetuals & SPY make results directionally valid) |
| Metric | Average % return per trade |
Bitcoin Results
2-Day RSI: Short-Term Momentum Pops
The first row shows the results when we sell/exit after one trading day (an average gain of 0.3% per trade and 48.71% winners). The best results are after 8 trading gains (2.14%). The win rate is in column 3.
5-Day RSI: Even Better Follow-Through
Interpretation: Bitcoin’s post-signal drift is positive for every horizon from one to ten days, confirming a momentum continuation effect after flashing “overbought.”
S&P 500 Results
2-Day RSI: Mean Reversion Dominates
The S&P 500 shows neutral/flat performance.
5-Day RSI: Flat at Best
Interpretation: Stocks exhibit the opposite behavior—prices often cool off once the RSI breaches 70. Classic mean reversion wins here.
Momentum vs. Mean Reversion: Why the Split?
- Market microstructure:
- Bitcoin trades 24/7 and is still retail-driven; fear of missing out (FOMO) can extend rallies.
- The S&P 500 is institution-heavy; portfolio rebalancing and volatility targeting encourage selling after sharp moves.
- Volatility regime:
- Crypto’s higher volatility amplifies trend persistence.
- Equity volatility is lower and more anchored by macro fundamentals.
- Liquidity & Leverage:
- Crypto derivatives offer high leverage, magnifying follow-through when breakouts occur.
- Equity leverage is limited, leading to quicker profit-taking.
Practical Trading Takeaways
- Bitcoin: Quick swing-trading strategies can legitimately ride the post-RSI-70 bump. Consider an 8-day time stop and measure slippage on your chosen venue before committing capital.
- Stocks: Buying the RSI-70 breakout is a low-odds bet. A contrarian (fade) approach or waiting for pullbacks may suit equities better.
- Position sizing: Expect larger drawdowns in crypto; size trades accordingly.
- Adaptive parameters: If volatility compresses, retest the RSI length—edge decay is real.
Limitations & Next Steps
- Sample bias: Past performance ≠ future returns; keep retesting.
- Broader universe: Extend the study to altcoins, sector ETFs, or individual equities.
- Transaction costs: Model realistic fees and slippage for your broker/exchange.
- Out-of-sample verification: Walk-forward or live-demo the strategy before going live.
Conclusion
When the RSI rockets above 70, Bitcoin tends to keep climbing—for about a week. The S&P 500? Not so much. Knowing which asset respects momentum (and which one mean-reverts) lets you fine-tune entries, exits, and risk. Test, verify, and trade the market in front of you—not the one you think should exist.