Bearish Divergence? Bitcoin Price Rises, But Network Growth Sends Warning Signals
The recent Bitcoin (BTC) price surge has sparked renewed interest and confidence among investors, leading many to believe that the BTC bull the race speeds up.
According to According to crypto trader and analyst Adrian Zduńczyk, Bitcoin reached a new 52-week closing high and maintained a close above the previous high of $32,000 for three consecutive weeks.
This sustained bullish momentum indicates strong bullish sentiment and signals the start of the third wave of the Bitcoin bull run.
Analyst highlights key trends
Zduńczyk highlights several dominant trends that contribute to Bitcoin’s positive outlook. The rising 200- and 50-week moving averages (MA) highlight the strength of the long-term uptrend, with key support levels at $28,800 and $26,600.
Additionally, there is an increasing correlation with the S&P 500, as evidenced by the 7-week correlation coefficient of 0.34. This alignment with traditional markets suggests that Bitcoin is increasingly trading the same way as the Nasdaq.
Fundamental factors also play an important role in Bitcoin’s upward trajectory. Traders eagerly await Bitcoin spot approval exchange traded funds (ETF) and the upcoming fourth half event.
Furthermore, according to Zduńczyk, the historical trend of previous halvings indicates that Bitcoin increased significantly after each half and never returned to pre-halving prices.
Looking at the daily trend, Zduńczyk highlights the technical strength demonstrated by Bitcoin’s reliable breakout above $32,000. Breakouts often lead to new trend formations that persist over time.
Despite occasional volatility, the 50-day Average True Range (ATR) trend and the 50-day Relative Strength Index (RSI) dynamic trend are upward, indicating continued positive momentum.
The future of Bitcoin looks bright, supported by positive market trends, fundamental factors and technical indicators. However, warning signs cast doubt on Bitcoin’s favorable outlook, as Ali Martinez, renowned crypto analyst underlines.
Is Bitcoin’s bullish momentum threatened?
Martinez draws attention to the bearish divergence between Bitcoin price and network growth, indicating a potential lack of sustained momentum in the ongoing uptrend.
The chart above shows a notable disparity between the exponential rise in Bitcoin price and the dramatic decline in new addresses in recent days.
This bearish divergence raises concerns about the overall strength of the current uptrend. Even though the value of Bitcoin has seen significant gains, the number of new addresses created has decreased significantly.
According to Martinez, this bearish divergence between Bitcoin price and network growth is an on-chain sell signal that traders should be aware of. The network’s slowing growth despite the price surge suggests that the current bullish momentum may not be strong enough to sustain.
At the time of writing, BTC is trading at $36,200, down 1.6% in the last 24 hours. However, it remains up 4.6% over the past 7 days.
It remains to be seen whether an increase in the number of new addresses will be able to sustain the bullish momentum of BTC and break the current consolidation phase. Alternatively, the cryptocurrency could retest support levels in the coming days.
Featured image from Shutterstock, chart from TradingView.com
