The S&P 500 has recently been pushing toward new high ground. But one “risk-on” asset is not keeping up.
Bitcoin peaked back in mid-March and has yet to revisit the prior highs.
The largest cryptocurrency has followed a similar path to the S&P 500 since the start of 2023.
Both showed uptrends marked by higher highs and higher lows along the way.
But Bitcoin stalled out seven months ago.
That comes as a surprise to many. Bitcoin and other cryptocurrencies have developed a reputation for reflecting bullish trends in the stock market.
So let’s check in on Bitcoin’s recent price action and see what could be in store next…
Regaining Momentum
After peaking around $73,000 in March, Bitcoin has made a series of lower highs and lower lows in price.
Price action is also chopping around the 50-day moving average (MA; blue line).
But Bitcoin started showing signs of trying to reverse the downtrend back in September.
Bitcoin fell toward the $53,000 level at “A” in August. Its attempt to rally over the 50-day MA failed. Then the price tested that level again at “B.”
But look at what has developed with the Relative Strength Index (RSI) in the bottom panel.
RSI measures changes in underlying momentum. A stock’s momentum helps traders identify the strength or weakness of any price move.
The RSI made a higher low (shown with the dashed line) even though Bitcoin’s price fell to a similar level at “A” and “B.”
That’s a divergence showing positive momentum. After that, Bitcoin has seen a more sustained move back above the 50-day MA since late September.
But that’s brought Bitcoin back to two key hurdles that have turned the crypto lower several times since its March peak.
Here are the levels to watch now…
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Back to Key Resistance
The recent rally in Bitcoin has brought both the price and the RSI to key levels.
Take another look at the chart below:
The dashed line shows price resistance since Bitcoin peaked back in March.
The price is right back at trendline resistance. That trendline has been tested on five occasions this year, with the price turning lower each time.
Also, note what’s happening in the RSI panel. The shaded area is right around the 60 level on the RSI.
That’s important to note because 60 on the RSI often serves as an overbought zone when the price is in a downtrend.
Ever since Bitcoin peaked in March, the RSI has struggled to sustain a move over the 60 area.
Each time Bitcoin’s price has moved lower from trendline resistance, the RSI peaked at the 60 level and turned lower.
And now, Bitcoin’s price and RSI are right back at those key levels.
If Bitcoin is rejected again, then watch for a move back to the 50-day moving average near $60,000.
Regards,
Larry Benedict
Editor, Trading With Larry Benedict
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