Daily Analysis by Omkar Godbole
A significant technical indicator is signaling a potential early conclusion to the bitcoin bull market, despite traders still positioning themselves for a sustained rally as the year comes to a close.
The indicator in question is the Relative Strength Index (RSI), a momentum oscillator that operates within a range of 0 to 100. It assists traders in assessing the speed and magnitude of recent price fluctuations, typically calculated over a period of 14 days, 14 weeks, or 14 months.
Currently, BTC’s 14-month RSI is displaying a bearish divergence, a pattern arising when the indicator begins to decline while prices continue to ascend. This divergence on the monthly chart suggests that BTC’s bull market might be losing steam and could possibly shift into a bearish trend.
The monthly chart reveals that, although BTC achieved a new high during the July-August window, surpassing the peak of December, the RSI moved inversely, establishing a lower high.
The bearish divergence becomes more noteworthy as it coincides with BTC facing resistance at a critical trendline drawn from the prior bull market peaks in December 2017 and November 2021.
In summary, bulls should be vigilant for possible bearish trend reversals. Nonetheless, the latest market flows indicate that traders are expecting further price increases.
“Blocks suggest traders are gearing up for further gains, with notable activity in December BTC call spreads ($125K/$160K). Ethereum’s focus was on tighter topside, with $4,800 strikes active for September, and front-end pressure lifting,” said Jake Ostrovskis, OTC Trader at Wintermute, in an email on Thursday.
Block flows refer to substantial transactions that are privately negotiated over the counter and outside of the public order book. Such transactions typically involve institutions and high-net-worth individuals.
The December call spread referenced by Ostrovskis essentially places a bet on prices rallying to $160K and above by the year’s end. The prevailing sentiment is for a continued rally extending into the year’s close and beyond, with price targets reaching as high as $190,000. At the time of writing, BTC was trading around $110,500, reflecting a 4.6% decline for the month.
