Historically Bearish Technical Formation May Spell Trouble for Bitcoin Bulls

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Bitcoin’s recent upwards momentum has led to a massive shift in the overall sentiment surrounding the crypto markets, as enthusiasm is tepidly increasing as more investors believe that the BTC’s 2018 lows are truly a long-term bottom.

Despite this, one of Bitcoin’s fundamental indicators is currently flashing a bearish signal that has historically been followed by large retraces, which could put BTC’s recent price surge in jeopardy.

Bitcoin (BTC) Climbs to Over $5,300 as Recent Tether-Based Fears Subside 

At the time of writing, Bitcoin is trading up nearly 1% at its current price of $5,310, up slightly from its daily lows of $5,260.

Earlier this week, BTC fell from highs of well over $5,600 due to news surrounding the New York Attorney General’s office claiming that controversial stablecoin Tether and related cryptocurrency exchange Bitfinex, have been defrauding investors and traders.

This news instantly sent Bitcoin and the entire crypto market reeling downwards, but BTC found a decent amount of support in the $5,200 region that stopped it from falling lower and has allowed it to begin climbing higher.

This recent drop initially appeared to put the upwards momentum that Bitcoin formed when it surged into the $5,000 region earlier this month at risk, but clearly investors were not too fazed by the news, as the scope of its impact was limited.

Moon Overlord, a popular cryptocurrency analyst on Twitter, spoke about the lack of impact the Bitfinex and Tether imbroglio had on the markets in a recent tweet, saying:

“For all the commotion and reactions from the $crypto community about the Bitfinex / Tether news it’s barely noticeable on the $BTC chart.”

BTC’s RSI May Signal That a Retrace is Imminent

Although the market’s muted reaction to the Tether news may signal both fundamental strength and growing maturity, Bitcoin’s RSI may be flashing a bearish signal that has historically been followed by large retraces.

HornHairs, another popular crypto analyst on Twitter, spoke about this bearish signal in a recent tweet, explaining that over the past five years, bearish RSI divergences on a two-day chart have nearly always been followed by a large dip.

“$BTC #Bitcoin 2D RSI Bear Div Study: In the past 5+ years, there have been only 5 accounts of a bearish RSI divergence on the 2D chart. Today will mark the 6th. The average drawdown AFTER the confirmation of those previous divs before a significant bounce/reversal was -44.25%,” he explained in a recent tweet.

As the quiet weekend trading session wraps up and a fresh week of trading begins, the validity of this indicator as a bearish signal will likely become more apparent as traders discover whether or not Bitcoin has enough buying pressure to continue surging higher.

Featured image from Shutterstock.

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