RSI Breaks 4-Month Downtrend: 5 Key Insights for Bitcoin This Week

As Bitcoin (BTC) continues to show signs of strength, market participants remain cautious amid mounting volatility. While Bitcoin attempts to lead a renewed bull market, many traders are still wary of potential downside risks, including the possibility of revisiting the $76,000 range before any new all-time highs.

Currently trading near two-week highs at $87,507, Bitcoin enters the final week of Q1 2025 in a volatile market, with diverging trader sentiment despite improving technical indicators. Here's what you need to know as Bitcoin navigates through the week ahead.

1. Bitcoin Faces Potential Downside Despite Positive Momentum

Bitcoin has shown some bullish promise, recently climbing nearly 15% from its multi-month lows earlier in March. However, trader sentiment remains cautious. While Bitcoin has recovered to near $87,500, there is still concern that a fresh dip could occur before a reliable uptrend is confirmed.

Popular trader CrypNuevo suggests that Bitcoin could face a pullback in the next one to two weeks, targeting liquidity around the $80,000 mark. "Market sentiment has been restored after hitting the short liquidations at $87.1k," CrypNuevo said, pointing to potential downside risks before the next rally.

Some analysts, including Arthur Hayes, former CEO of BitMEX, speculate that Bitcoin could test new all-time highs near $110,000 before experiencing a 30% correction. For traders focusing on short-term movements, key levels to watch include the $85,050 and $85,500 ranges, where Bitcoin has yet to reclaim key trendlines such as the 200-day and 100-day moving averages.

2. March 28 PCE Data Could Impact Risk Sentiment

As the final trading week of Q1 2025 unfolds, market participants are focusing on the release of the February Personal Consumption Expenditures (PCE) index on March 28. Known as the Federal Reserve’s preferred inflation gauge, the PCE report will provide crucial data on the trajectory of U.S. inflation. The numbers are expected to be in line with February’s results, which were below expectations.

Financial market research firm Bespoke sees positive developments for risk-on assets, citing the Fed’s estimate that inflation will continue to trend lower. This could create space for further interest rate cuts, which would benefit Bitcoin and other risk assets.

However, with the U.S. government’s reciprocal tariff arrangement set to take effect on April 2, inflationary pressures could rise, potentially counteracting the positive effects of PCE data. Federal Reserve Chairman Jerome Powell recently pointed to tariffs as a key driver of rising inflation expectations, which could temper optimism in the market.

3. RSI Breakout Signals Bullish Continuation

One of the most notable developments for Bitcoin is the ongoing breakout in its Relative Strength Index (RSI). RSI, a key momentum indicator, is showing signs of abandoning a 4-month downtrend that has been in place since November 2024. This suggests that Bitcoin may be preparing for a bullish continuation across both short and long-term timeframes.

Rekt Capital, a well-known trader and analyst, highlighted that the RSI on the daily chart is retesting its downtrend line from November 2024 as new support. If this trend continues, Bitcoin could see increased upward momentum in the coming weeks. Matthew Hyland, another respected analyst, pointed out that Bitcoin has confirmed a bullish divergence on the weekly RSI for the first time since September 2024. With the daily RSI sitting at 51.4—just above its key midpoint—Bitcoin bulls may be poised for a breakout.

4. Short-Term Bitcoin Holders Face Unrealized Losses

Short-term Bitcoin holders (STHs)—investors holding Bitcoin for less than six months—are under increasing pressure as a significant portion of their holdings is now underwater. According to on-chain analytics firm Glassnode, unrealized losses among short-term holders have surged, pushing many into a loss-making position.

In its latest analysis, Glassnode noted that the rolling 30-day realized loss for short-term holders had reached $7 billion, marking the largest sustained loss event of this cycle. However, this figure remains far below prior capitulation events like the $19.8 billion in losses seen in 2021-22. Despite this, the current wave of losses highlights the vulnerability of newer investors to Bitcoin’s price volatility, especially during times of market uncertainty.

5. Stablecoin Reserves Hit Record Highs on Binance

Amid the ongoing volatility, investor confidence appears to be returning, as evidenced by the record high stablecoin reserves on Binance. On March 21, Binance saw its total ERC-20 standard stablecoin reserves exceed $31.8 billion. This marks a significant development, as Binance remains the largest exchange by trading volume, and these stablecoin reserves are viewed as a positive signal for market liquidity.

CryptoQuant, an on-chain analytics platform, noted that the increase in stablecoin reserves could indicate that investors are preparing to re-enter the market, especially as Bitcoin shows technical signs of potential upward movement. The return of stablecoin liquidity on exchanges like Binance may play a crucial role in driving Bitcoin’s next major price move.

Conclusion: Navigating the Week Ahead for Bitcoin

As Bitcoin continues to test new price levels and break important technical barriers, market participants remain cautious, with downside risks still looming. Key data points such as the upcoming PCE report and the U.S. government’s tariffs will play a significant role in shaping market sentiment in the short term.

Despite the current uncertainty, Bitcoin's RSI breakout and record stablecoin reserves suggest a potential for continued bullish momentum. However, traders should remain vigilant for any signs of reversal, especially as short-term holders continue to face unrealized losses.

For more information on Bitcoin's price movements and real-time updates, visit CoinMarketCap's Bitcoin page.