What happened
Bitcoin (BTC) has recently flashed an extremely rare technical signal on its weekly chart known as a "bullish divergence." This marks only the second time in the asset's history that this specific pattern has emerged, with the first instance occurring during the post-FTX collapse period. This formation suggests that selling momentum is exhausting even as price tests lower levels, potentially paving the way for a rally toward the $90,000 psychological threshold.
Technology context
In financial market technical analysis, a divergence occurs when the price of an asset moves in the opposite direction of a technical indicator (typically a momentum oscillator like the Relative Strength Index - RSI).
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Understanding the Signal
A "bullish divergence" forms when the price records lower lows while the indicator records higher lows. This indicates that despite the price drop, buying pressure is building up "under the hood." In the Bitcoin ecosystem, this phenomenon is often backed by on-chain data showing accumulation by long-term holders (LTHs) during periods of market fear or uncertainty.
Why it matters
The appearance of this signal is significant because it validates market resilience amidst recent volatility. The last time this divergence appeared, it marked the end of the FTX-induced bear market and the beginning of a massive recovery phase. For institutional and retail investors alike, this suggests that the macro market structure remains bullish and that recent corrections were likely healthy retracements rather than a trend reversal.
Key terms explained
- Bullish Divergence: A technical setup where price hits new lows but the momentum indicator rises, signaling a potential upward trend reversal.
- RSI (Relative Strength Index): A momentum oscillator that measures the speed and change of price movements, used to identify overbought or oversold conditions.
- Momentum Oscillator: A tool used to determine the strength or weakness of a price trend by comparing closing prices over time.
Impact
- Short-term: Increased confidence among retail traders, likely leading to heightened buying pressure and testing of resistance levels between $75,000 and $80,000.
- Medium-term: Strengthening of Bitcoin's position as "digital gold" under the current U.S. administration led by President Donald Trump (as of January 2025), whose pro-crypto stance is expected to foster a favorable regulatory environment, supporting the push toward $90,000.
What's next
Expect heightened volatility as Bitcoin nears new all-time highs. If the divergence is confirmed by a weekly candle close above key support levels, the $90,000 target becomes a realistic objective for the first quarter of the year. Investors should closely monitor capital inflows into Spot Bitcoin ETFs, as they remain the primary drivers of market liquidity and demand.
Sources
- Cointelegraph Markets
- TradingView Technical Analysis
- Glassnode On-chain Insights
Educational analysis generated by AI and editorially reviewed.