Overbought refers to a situation where the price of an asset, like a cryptocurrency, has risen excessively and may be due for a correction. This condition often indicates that the asset is being traded at a higher price than its fundamental value, driven by heightened demand or speculative trading.One common way to identify overbought conditions is through various technical indicators, such as the Relative Strength Index (RSI). An RSI reading above 70 generally suggests that an asset is overbought. Traders may view this as a warning sign, indicating that a price pullback is possible since the asset might be losing momentum.When an asset is overbought, it doesn’t guarantee an immediate drop in price, but it can lead to higher volatility as investors start taking profits. If many traders sell at once due to overbought indicators, this can trigger a decline, further confirming the overbought condition. Understanding this concept helps traders make informed decisions about when to buy or sell.