Bitcoin's Momentum Wanes Despite Potential New Highs

Coindesk’s analyst Oliver Knight has drawn parallels between current Bitcoin price movements and on-chain indicators from 2021, suggesting a potential formation of a “double top” structure. Knight highlighted the significance of the weekly Relative Strength Index (RSI), which has shown three bearish divergences in March and December 2024, as well as May 2025. A bearish divergence occurs when the RSI declines despite an increase in prices, indicating a potential overbought situation.

Knight also noted that the trading volume during the recent breakout has been lower compared to the initial breakout at $100,000, signaling a diminishing momentum in the bullish trend. Institutional trading platforms have reported a significant reduction in activity, with the Chicago Mercantile Exchange (CME) Bitcoin futures trading volume failing to exceed 35,000 contracts three times in the last month, a stark contrast to previous levels that frequently surpassed 65,000 contracts.

Additionally, there is a divergence between open interest and price trends. Open interest has decreased by 13% from the January spike to $109,000, while Bitcoin’s price has only retraced by 5.8%. Historical data shows that during Bitcoin’s ascent to $69,000 four years ago, open interest fell by 15.6%, despite a 6.6% price increase. Knight concluded that while Bitcoin may approach new highs similar to 2021, the underlying momentum appears to be waning.

Bitcoin’s price trends have shown signs of weakening momentum, according to insights from analyst Oliver Knight. While Bitcoin may approach new highs similar to those seen in 2021, the underlying momentum driving these price movements appears to be diminishing. This observation raises critical questions about the cryptocurrency’s stability and its potential role as a diversifier in investment portfolios.

The evolving relationship between Bitcoin and traditional equity markets is complex and multifaceted. Recent analysis indicates that while Bitcoin exhibits a strong negative correlation with US equities over short periods, this relationship is not consistent in the long term. The seven-day trailing correlation suggests significant fluctuations, which raises important questions about Bitcoin’s reliability as a hedge against traditional markets. This variability in market behavior can deter investors seeking asset stability during turbulent periods.

The maturation of Bitcoin as a financial asset is closely tied to its increasing institutional adoption. According to analyst Marcin Kazmierczak, increased institutional adoption will help stabilize Bitcoin and enhance its potential as a diversified investment. BlackRock’s endorsement of Bitcoin as an essential portfolio element is a notable example of this trend. With an annualized return exceeding 230% over the past five years, Bitcoin has outperformed both conventional stocks and traditional safe-haven assets, highlighting its potential for diversification.

Bitcoin’s decreasing volatility is another positive signal for its future as a financial asset. The cryptocurrency’s volatility has seen a notable decline, recently hitting a 563-day low. This decrease suggests that investors are starting to view Bitcoin as a long-term investment vehicle. Reports indicate that Bitcoin’s weekly volatility has dipped below that of both the S&P 500 and Nasdaq 100, underscoring a shift in investor perception regarding Bitcoin’s role in diversified investment strategies.

The future of Bitcoin in financial markets looks promising. While it has yet to fully emulate the stability seen in instruments like gold or government bonds, its rising institutional recognition and falling volatility suggest a growing maturity. As Kazmierczak notes, Bitcoin will see growing recognition as a portfolio diversifier, paving the way for broader acceptance within formal investment strategies. Investors should consider these dynamics carefully to optimize their strategies in the evolving landscape of cryptocurrency.