Bitcoin (BTC) price spike to $ 50,000 last week risks exhaustion due to a mismatch between the price of the cryptocurrency and dynamic trends.
So it appears that Bitcoin’s price and Relative Strength Index (RSI) have been moving in the opposite direction since late July. In fact, a sharp spike in BTC / USD bids coincided with lower momentum spikes, suggesting that the pair’s upward momentum is weakening.
Normal RSI momentum tends to limit price action. That is, it goes up when the price goes up and goes down when the price goes down. In some cases, however, the RSI deviates from tracking price action, resulting in what is known as an RSI divergence.
Technical analysts view the RSI divergence as a strong signal to spot price reversals. For example, a bullish divergence, where the price falls and the RSI rises, causes traders to buy the asset in anticipation of a rebound. Similarly, bearish divergence – with prices rising and the RSI falling – causes traders to take profits at the top while anticipating a retreat.
The Bitcoin daily chart below shows the cryptocurrency in bearish divergence.
The downward signal appears as Bitcoin struggles to break the upward move above $ 50,000. On Sunday, the benchmark cryptocurrency traded at $ 48,387, or 4.19% lower from its three-month high of $ 50,505, which it hit on August 3 after a similar upward boom of 72.36%.
Good morning! $ BTC has broken the bullish structure of the LTF. The main target remains $ 38,000 as long as it stays below $ 50,000
When it finally drops to that level, buy as much as you can
– il Capo by $ NOIA (@CryptoCapo_) August 29, 2021
On the flip side, Bitcoin’s daily RSI initially rebounded in sync with prices, but peaked on July 30th, which was way ahead of the price, reaching $ 50,505. Since July 30, Bitcoin price has formed a series of higher highs while the RSI has printed lower highs, suggesting a weakening upward momentum.
A similar bearish divergence between January and April 2021 was instrumental in predicting a Bitcoin price decline, as shown in the graph below.
The bearish divergence signal comes as Bitcoin holds well above $ 30,000 amid expectations that it would become a hedge of choice against inflationary pressures among accredited investors.
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.
Bitcoin price soared $ 1,500 in an hour on Friday after Federal Reserve Chairman Jerome Powell presented an inflation-friendly, moderate 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 monthly asset purchase program coupled with its near-zero interest rate policy.
Similar: Bitcoin price is making a comeback as 3 indicators reflect the strength of BTC
The strong fundamentals have led 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 the support of the key wave that acts as an accumulation area for traders.
Similarly, another market analyst, Ryan Clark, found that Bitcoin only consolidated below $ 50,000, just as it did when it traded below $ 24,000 before the bullish breakout in December 2020.
Bitcoin below the 50,000 level behaves as if it were below the 24,000 level.
– Ryan Cantering Clark (@CanteringClark) August 28, 2021
On the flip side, TraderXO noted that Bitcoin could still fall towards the USD 39,000-40,000 range, but remained convinced that the cryptocurrency would see an attractive rebound from the lower end.
The analyst called Bitcoin’s all-time high of USD 65,000 a long-term upward target.
Taken substantial profits of 48-49,000 – no daily close above 49,000 – until that happens, looking for higher prices.
Also open to the likelihood of buying opportunities around September 39-42
Interested in HTF swing trades only. pic.twitter.com/jjvAFkCwmV
– TraderXO (@Trader_XO) August 29, 2021
The views and opinions expressed are those of the author only and do not necessarily reflect the views of Cointelegraph.com. Every step of investing and trading involves risk, so you should do your own research when making a decision.