By CCN.com: According to a cryptocurrency trader, a technical indicator of bitcoin is signaling a potential downturn in the market for the first time since December 2017.
The indicator, known as the Relative Strength Indicator (RSI) bearish divergence, signals a bearish downtrend and a decline in momentum.
The RSI is typically utilized by traders to evaluate the momentum of the trend of an asset or a market. A bearish divergence flashes when the price of an asset, in this case bitcoin, rises while the RSI heads downwards, suggesting a lack of momentum.
Although the RSI bearish divergence does not necessarily indicate that the bitcoin price would decline rapidly in the short-term, it shows that the asset would need to demonstrate significant strength to avoid a trend reversal.
The decline in the momentum of bitcoin was not triggered by technical factors. Rather, the Tether (USDT) scandal and the office of the New York Attorney General filing of a lawsuit against iFinex, the company that oversees Tether and Bitfinex, led the bitcoin price to plunge by 7 percent.
The office of the New York Attorney General alleged Bitfinex of mismanaging $850 million of Tether’s cash reserves in an attempt to “hide” the company’s loss.
The official document claimed Bitfinex sent $850 million to Crypto Capital, a “bank” based in Panama that worked with exchanges such as the now-defunct QuadrigaCX. Bitfinex failed to get the $850 million back.
“Our investigation has determined that the operators of the ‘Bitfinex’ trading platform, who also control the ‘tether’ virtual currency, have engaged in a cover-up to hide the apparent loss of $850 million dollars of co-mingled client and corporate funds,” said Attorney General Letitia James.
The Tether controversy negatively affected the short-term trend of bitcoin and forced the dominant cryptocurrency to experience a trend reversal on the RSI.
“2D RSI Bear Div Study: In the past 5+ years, there have been only 5 accounts of a bearish RSI divergence on the 2D chart. Today will mark the 6th. The average drawdown after the confirmation of those previous divs before a significant bounce/reversal was -44.25%,” one trader noted .
Based on the data provided by OnChainFX, the real daily spot volume of bitcoin has dropped from around $500 million to $246 million in the last three days, dropping below the average daily volume of the asset in early March.
Bitcoin could grind through the RSI bearish divergence if the volume of the market holds up and the bitcoin price engages in a strong attempt to escape the $5,000 to $6,000 range, which skeptics have argued is an important range for BTC to break out of.
In the past seven days, due to the Tether incident, the valuation of the cryptocurrency market has dropped by around $14 billion, leaving many traders to be cautious about the short-term trend of the asset.
Off of its strategic partnership with Jaguar Land Rover, the price of IOTA surged by 16 percent against the U.S. dollar.
As a part of the partnership, Jaguar Land Rover will utilize cryptocurrencies to incentivize users in the future as the car market moves towards autonomous car technology.
“In the future, an autonomous car could drive itself to a charging station, recharge and pay, while its owner could choose to participate in the sharing economy – earning rewards from sharing useful data such as warning other cars of traffic jams,” Jaguar Land Rover Software Architect Russell Vickers said.
Click here for a real-time bitcoin price chart.