Bitcoin’s key momentum metric just flashed bearish with BTC price pinned under $50K

The run-up in the Bitcoin (BTC) price toward $50,000 last week risks exhaustion due to a mismatch between the cryptocurrency’s price and momentum trends.

So it appears the Bitcoin’s price and relative strength index (RSI) have been moving in the opposite direction since late July. In doing so, even a strong push higher in the BTC/USD bids has coincided with lower peaks in momentum, suggesting that the pair’s upside momentum is weakening out.

Bearish divergence

A normal RSI momentum tends to tail the price action. That said, it rises when the price rises and falls when the price drops. But in some cases, the RSI deviates from pursuing the price trends, leading to a so-called RSI divergence.

Technical analysts consider RSI divergence as a powerful signal to spot price reversals. For instance, a bullish divergence, wherein the price falls and RSI rises, prompts traders to buy the asset in anticipation of a rebound. Similarly, a bearish divergence—featuring rising prices and falling RSI—prompts traders to take profits at the top while expecting a pullback.

The Bitcoin daily chart below shows the cryptocurrency in bearish divergence.

BTC/USD 1D chart featuring bearish divergence. Source: TradingView.com

The downside signal appears as Bitcoin struggles to break bullish above $50,000. As of Sunday, the benchmark cryptocurrency was trading at $48,387, or 4.19% lower from its three-month high of $50,505, achieved on Aug. 3, following a similar 72.36% upside boom.

On the other hand, Bitcoin’s daily RSI initially rallied in sync with prices but topped out on July 30, which was way ahead of price, hitting $50,505. Since July 30, the Bitcoin price formed a sequence of higher highs while RSI printed lower highs, suggesting a weakening upside momentum.

A similar bearish divergence between January and April 2021 was instrumental in predicting a Bitcoin price drop, as shown in the chart below.

Bitcoin price-RSI divergence from January-April 2021 period. Source: TradingView.com

Bullish indicators

The bearish divergence signal comes as Bitcoin holds strongly above $30,000, amidst anticipation that it would become a hedge of choice among accredited investors against inflationary pressures.

The perception has led many analysts, including investment researcher Lyn Alden and Fundstrat CEO Tom Lee, to predict a $100,000 valuation for the cryptocurrency in 2021.

On Friday, Bitcoin price shot upward by $1,500 in an hour after Federal Reserve Chairman Jerome Powell presented a pro-inflation, dovish policy outlook at this year’s Jackson Hole symposium.

As a result, the biggest bullish indicator for Bitcoin remains the Fed’s aggressive $120 billion a month asset purchase program, coupled with its near-zero interest rate policy.

Related: Bitcoin price stages a comeback as 3 indicators reflect BTC’s strength

The strong fundamental has prompted technical analysts to envision a long-term uptrend in the Bitcoin market. Namely, independent market analyst Teddy Cleps presented a bullish outlook for the cryptocurrency, based on key wave support that acts as an accumulation area for traders.

Bitcoin 4H chart featuring wave support. Source: Teddy Cleps, TradingView.com

Similarly, Ryan Clark, another market analyst, noted that Bitcoin has been merely consolidating below $50,000 just like when it was trading below $24,000 before the December 2020’s bullish breakout.

On the other hand, TraderXO noted that Bitcoin could still fall towards the $39,000-40,000 area but remained convinced that the cryptocurrency would log an attractive rebound from the lower range.

The analyst marked Bitcoin’s all-time high near $65,000 as its long-term upside target.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

%post_title%

Cryptovixens Source

Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Share on pinterest
Pinterest

Responses

Your email address will not be published. Required fields are marked *

Get 20% Discount

Sign up to receive updates, promotions, and sneak peaks of upcoming products. Plus 20% off your next order.

Promotion nulla vitae elit libero a pharetra augue

Nullam quis risus eget urna mollis ornare vel eu leo. Aenean lacinia bibendum nulla sed