Bitcoin bearish divergence – does the rise fail at $60k mark?

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Bitcoin threatened by bearish divergence – will the rise fail again at the $60k mark?

A widely followed technical indicator in the bitcoin market is signalling bullish exhaustion as the cryptocurrency flirts with $60,000.

The 14-day relative strength indicator (RSI), which informs traders of Bitcoin’s oversold and overbought conditions, has formed lower highs so far in 2021, decoupling from the cryptocurrency’s relentless uptrend that Bitcoin Bank forms higher highs as the quarterly period matures.

The divergence between the bitcoin price and its momentum indicator indicates bull fatigue. It has created opportunities for the bears to take the lead – raising the prospects of the cryptocurrency changing direction from an uptrend to a downtrend.

Historical fractals support the bearish theory

For example, a bearish divergence between bitcoin price and RSI led to a downward correction in February 2017 and August 2017. Also in 2019, the cryptocurrency peaked at $13,868 while its momentum oscillator declined on the weekly chart. The price fell below $4,000 by December of the same year.

Bitcoin showed signs of peaking above $61,000. The cryptocurrency experienced a modest correction this week, forming a weekly low just below $53,000. Nonetheless, upward momentum remained higher after the Federal Reserve announced it would keep its benchmark policy rate near zero until 2023.

The cryptocurrency performs well in ultra-low interest rate environments. It surged more than 1,500 per cent from its mid-March low of $3,858 after the Federal Reserve introduced its ultra-loose monetary policy.

Investors treated BTC as a safe-haven asset against their inflation fears triggered by the excessive liquidity of the US dollar in the economy.

The cryptocurrency now serves as a store of value alternative to cash on the balance sheets of Wall Street firms, including Tesla, Square and MicroStrategy. It has also found its way into the traditional financial platforms of Bank of New York Mellon, MasterCard, Visa, Morgan Stanley, Goldman Sachs and PayPal as an investable asset.

Konstantin Anissimov, the managing director of crypto exchange CEX.io, believes the strong fundamentals would offset the sceptical technical indicators. Anissimov::

„A fall back to the $56,000 support zone cannot be ruled out either. But Bitcoin’s longer-term outlook remains bullish and a break above $60,000 should not be a surprise.“