Despite Fed chair Powell’s comments on possible additional rate hike last Thursday, bitcoin continues to fluctuate around $37k. The wider financial market seems to hold optimism for the U.S. CPI and retail sales to indicate slowing inflation and demands this week, and if they do, bitcoin could test $38k again. In the short term, recovering that level could cause option traders who are shorting OTM calls to long bitcoin and accelerate its rise to around $40k. However, bitcoin’s relative strength index (RSI) continues to diverge from the price trend, which usually indicates a trend reversal. RSI’s divergence has occurred twice this year and they usually last about one month until the price changes its course (Fig.1). The current RSI divergence began on October 25, so the current bitcoin’s price trend may start to reverse towards the end of the week. Therefore, if bitcoin manages to recover $38k in the short run, that could be its last leg up in the current trend.
