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.
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.
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.