Currently hovering around a heavily compressed price range after failing multiple times to surpass $110,000 earlier this month. The past few days have seen the leading cryptocurrency trading around $105,000, with neither bulls nor bears in control. Despite the overall consolidation, a subtle but important signal has begun to emerge beneath the surface, particularly on the four-hour chart, which may send Bitcoin to a new all-time high soon.
Return of a rare divergence pattern on Bitcoin's four-hour chart
Crypto analyst Luca moved to the social media platform X to share a chart highlighting an important technical development on Bitcoin's four-hour timeframe: the return of the bullish divergence. This signal, which previously appeared in early April, preceded the massive surge that pushed Bitcoin to its all-time high on May 22 at $111,800. The divergence itself is forming again, and a Bitcoin price breakout may be very close.
As illustrated in the four-hour candlestick chart below, the divergence is clearly evident between price action and the Relative Strength Index (RSI). The price has made lower lows, while the RSI has recorded higher lows. This divergence is an early indicator of waning selling momentum, which may be followed by a bullish reversal. The previous instance of this pattern directly preceded a sharp move from a low of $74,000 in early April to over $111,000 within a few weeks.
What does this divergence mean for Bitcoin's price?
Bullish divergences on medium-term charts, such as the four-hour chart, are known to be the first signals of a reversal when supported by increasing trading volume. In the current case of Bitcoin, the emergence of this pattern again may mean that the recent pullback from $111,800 has ended. With the RSI trending upward now even as the price dips slightly, Bitcoin may witness another subtle accumulation phase before its next rise.
If the pattern holds as it did in its previous performance in April, the leading cryptocurrency may be gearing up for another push towards new record levels. Bitcoin is currently not far from a new all-time high, as it is only about 5.5% away from its price peak. Based on this, another strong breakout could easily exceed the previous high of $111,800.
Although Bitcoin's price is relatively stagnant right now, the presence of this bullish divergence reminds us how quickly things can change. The previous bullish divergence ended with a 50% price increase. A similar performance from the current price level would translate to another target above $160,000.
At the time of writing this report, Bitcoin is trading at $105,700, up 1.4% over the past 24 hours, already showing signs of beginning to activate the bullish divergence signal.
