Key Takeaways

  • BTC faces a near-term resistance at $12,000 which will decide a possible bullish break or a medium-term reversal zone.
  • A bearish divergence between rising prices and falling daily active addresses signals potential exhaustion of bullish momentum.
  • The outcome of tonight’s U.S. stimulus talks could add fuel to a bullish breakout or extinguish building momentum. 

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Bitcoin has risen by more than 3% since the weekly price open as the pioneer cryptocurrency trades within touching distance of the psychological $12,000 resistance level.

The surge in BTC came after Federal Reserve Chair, Jerome Powell, discussed the possibilities of rolling out Central Bank Digital Currency and how the Libra project has reinforced the complexities of launching a national digital currency.

With BTC’s fundamental outlook appearing extremely bullish, a break above $12,000 could provoke a continuous rally towards the $13,000 level, placing the 2019 trading high around $13,900 firmly in focus.

BTC/USD 1-day by TradingView

Traders should treat the latest move higher in BTC with some degree of caution. A lower time frame analysis shows that bearish divergence has been developing on the MACD indicator since the cryptocurrency broke above the $11,000 level earlier this month.

Phemex - 10 off

Typically crypto traders use this trend following indicator to reveal the rising or falling momentum of an asset’s trend. A crossover of the MACD (blue line-the deviation between 12 days and 26 days-moving averages) and the signal line (yellow-9 day moving average of the MACD) to the upside indicates an incoming bullish trend, while a crossover to the downside signals a bearish trend.

Bitcoin US dollar 4-hour chart
BTC/USD 4-hour chart by TradingView

The current four-hour price chart shows the MACD bars getting smaller and smaller while price rises, confirming negative price divergence. Additionally, the MACD signal line is also showing negative price divergence and has been declining while BTC price has been rising.

Should Bitcoin start to pull back from current levels and trade below its weekly opening price then the risk of price dropping towards $11,000 and eroding the negative MACD price divergences increases dramatically.

Bitcoin active addresses graph by Santiment
Bitcoin active addresses by Santiment

Data from on-chain crypto sentiment platform Santiment shows that a clear-cut bearish divergence between rising prices and a falling number of BTC daily active addresses has been forming over recent days, signaling a potential slowing in Bitcoin buying activity.

Santiment recently tweeted that,

“Bitcoin’s mild climb of around +3% this weekend was a bit of a surprise, considering the 730.5M daily active addresses transacting on the network Sunday was the lowest mark since June 28th. Our model points to a fairly clear-cut bearish divergence forming.”

As the deadline looms for the next COID-19 stimulus talks, any positive developments ahead of the election would almost certainly have the potential to override the bearish divergences outlined and send BTC towards the current yearly high, and possibly the 2019 yearly high.

However, should the deadlock remain in place between Republicans and Democrats, and a stimulus package cannot be agreed upon until after the U.S. election, then the mentioned on-chain and technical divergences may become even more hazardous for Bitcoin bulls over the coming weeks.

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