Oliver Renick

The worst thing a hyper-momentum asset can do is let down its fans. There’s a growing chance that could happen to bitcoin. 

If bitcoin doesn’t rally though its upcoming “halving” event, things could get ugly in a hurry for crypto bulls – technically and fundamentally. Technically, price is still hovering around its all-time high from three years ago, creating a slowdown on the charts that looks similar to how it fizzled at this level back in 2021. With the bitcoin reward to miners set to be cut in half later this month, a selloff at this juncture would be a shock to miners and potentially threaten the blockchain. 

The technical pattern is a bearish momentum divergence on the long-term chart of bitcoin. The momentum of bitcoin measured by its 14-day RSI has been trending lower for years now despite the price making records. That’s because each new high has been less explosive than the last – not a big problem if price keeps trending higher, but a very big problem when it rolls over. A bearish momentum divergence – when momentum slows despite higher prices – is particularly bad for a purely speculative asset because it suggests there are no new buyers at a certain level, despite multiple attempts to find one. 

Bitcoin exhibited this behavior on its first approach to $70,000 back in 2021. It had an epic sprint after breaking through $20,000, but instead of a sharp peak, it had a gradual rollover as RSI made lower-lows while price made higher-highs. After failing to find buyers on multiple attempts above $65,000, it cracked hard, and on its return trip, petered out below $70k again. That spawned the deep bear market that took down FTX and was resuscitated later on by ETFs. 

The problem is that, despite all the talk about how ETFs would bring in a new, sophisticated crypto investor, nothing’s changed. Since those funds launched, an equal amount of money has been poured into a smorgasbord of useless, comical alternative coins. And bitcoin still trades nothing like gold, which came alive these past two weeks as bitcoin and stocks slid together. 

Coiners are counting on this upcoming halving to be a positive catalyst for price. The events have always coincided with big rallies, but that was back when momentum was much stronger. If price doesn’t rally enough to offset the diminished block reward for miners, and enough cease operations, control over the blockchain could become centralized and at risk of attack. It’s a worst-case scenario, but it’s not hard to see how we could get there.

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