Bitcoin (BTC) price has been hovering slightly above the horizontal support area of $25,700 for almost a month.
While the price action is bearish, the Relative Strength Index (RSI) has given a bullish signal that previously preceded a 100% price increase.
Bitcoin consolidates near $26,000 despite bullish divergence
Technical analysis on the daily time frame provides mixed signs due to conflicting readings from the price action and RSI.
BTC price has fallen below a descending resistance line since its annual high of $31,800 on July 13. The line was last confirmed on August 14th, leading to a sharp decline three days later that sent BTC to $25,166. The price has not yet broken through this low.
However, the subsequent upswings were also weak. This is particularly clear from the fact that Bitcoin does not reach the descending resistance line (red circle). Now, BTC price is hovering above the horizontal support area of $25,700.
Despite these bearish readings, the Relative Strength Index (RSI) is bullish. Market traders use the RSI as a momentum indicator to identify overbought or oversold conditions in a market and make decisions about accumulating or selling assets.
Readings above 50 coupled with an uptrend suggest that bulls continue to have the advantage, while readings below 50 indicate the opposite and indicate possible bearish conditions.
Although the indicator is below 50, it has been rising since August 18th. More importantly, the RSI has created a clear bullish divergence (green line).
This is an event in which an increase in momentum is accompanied by a decrease in price. This indicates that the decline is not legitimate and is often associated with an uptrend reversal.
BTC/USDT daily chart. Source: TradingView
Although technical analysis is mixed, crypto investors still believe in Bitcoin. A recent report found that almost half of the world’s crypto millionaires have assets in Bitcoin. Additionally, the impending approval of a Bitcoin ETF could have a positive impact on its future price.
BTC price prediction: What does history say about this bullish divergence?
The above-mentioned bullish divergence on the daily time frame is notable as it also marks a move outside the oversold RSI area.
Last year, the RSI fell into oversold territory and then only moved above it three times (green dots). Furthermore, a bullish divergence occurred in this oversold area only once, in November 2022.
This divergence catalyzed a 100% bullish move that preceded the entire advance leading to the yearly high. A further 100% increase would see BTC price reach $52,000.
In any case, a breakout of the resistance line is required for the trend to be considered bullish.
BTC/USDT daily chart. Source: TradingView
Despite this bullish BTC price prediction, a breakout of the $25,700 area suggests that further downside is to be expected. In this case, the most likely outcome will be an 8% decline to the 0.5 Fib retracement support at $23,600.
For the latest crypto market analysis from BeInCrypto, click here.
Disclaimer
In accordance with Trust Project policies, this pricing analysis article is for informational purposes only and should not be considered financial or investment advice. BeInCrypto is committed to accurate, unbiased reporting, but market conditions are subject to change without notice. Always do your own research and consult a professional before making any financial decisions.
Learn Crypto Trading, Yield Farms, Income strategies and more at CrytoAnswers
https://nov.link/cryptoanswers
Comments are closed.