Bitcoin, Ether Momentum Traveling Divergent Paths

Momentum for Bitcoin (BTC) and ether (ETH) is currently traveling in opposite directions.

The Relative Strength Index (RSI), a technical indicator that measures price swings, suggests bitcoin’s price is stalling, while ether’s is likely to push higher in the near future. So far this week, BTC’s price has hovered around the $28,000 threshold where it’s stood most of the past three weeks, while ETH has risen above $1,900 for the first time in nine months.

A divergence between asset price and technical indicator occurs when price moves in one direction, and said indicator moves the opposite way. Often, such divergences foreshadow potential tops and bottoms in an asset’s price, or changes in direction.

Bitcoin’s current bearish divergence between price and momentum indicates that prices may have topped out in the short term, or at least have halted temporarily.

Bitcoin’s RSI

Bitcoin’s RSI has declined 14% since March 17. Over that identical time period BTC’s price has increased approximately 2%. RSI is often a proxy to measure an asset’s momentum.

Declining momentum relative to an asset’s price increase indicates that a directional move may be weakening, and warrants a cautious eye. Bitcoin’s RSI moving above 70 also sent it into an “overbought” range.

The RSI indicator ranges from 0 to 100, with levels above 70 implying that an asset is trading at a premium, and levels below 30 implying that an asset is “oversold” and trading at a discount. An example of this price and momentum dynamic occurred when BTC rose 36% between March 10 and March 17, while its RSI fell to 27.

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Investors should note that “overbought” or “oversold” levels should not be interpreted as automatic signs to enter or exit an asset. Both conditions can persist for prolonged periods, but they should be monitored.

Ether’s price relative to momentum has contrasted to bitcoin as ETH’s RSI has been rising in conjunction with its price.

Where BTC’s RSI has fallen 14% since March 17, ETH’s has been relatively flat, changing by 2%. ETH’s price has increased by 6% over the same period.

A more pronounced indication of agreement between ETH’s price and momentum has occurred since March 27 with its price rising 10% and its momentum spiking 24%.

Additionally, ETH’s RSI hasn’t reached traditionally overbought levels since January, implying there may still be room to the upside for the asset.

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Bitcoin and ether 04/05/23 (TradingView)

Edited by James Rubin.

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