Bitcoin Shows Bullish Divergence Despite 96% Drop in Long-Term Holder Buying

Bitcoin (BTC) is trading around $82,300, having gained roughly 28% over the past three months despite this week's decline.

A concealed momentum indicator on the daily chart indicates the uptrend may persist. However, purchases from long-term holders have fallen by 96%.

Hidden Momentum Signal Shows Uptrend Persists

From September 2 to October 8, Bitcoin formed a higher low on its daily chart. During the same period, the Relative Strength Index (RSI), a measure of buying momentum ranging from 0 to 100, declined from roughly 65 to 47, marking a lower low.

This combination is known as a hidden bullish divergence. It occurs within uptrends and indicates that a pullback has tempered buying pressure without disrupting the prevailing trend.

Selling volume supports this interpretation. Red volume bars have increased since October 6, but the bar on October 8 remained roughly 18% smaller than the peak seen on October 2. Sellers are active, but with diminished intensity compared to a week ago.

So why did momentum decline more sharply than price? The answer may lie with buyers.

Weakening Holder Buying Accounts for the Momentum Decline

The Hodler Net Position Change, a Glassnode indicator measuring the monthly shift in coins owned by long-term holders, reached a high of 25,734 BTC on September 20. By October 8, it had plunged 96% to 1,051 BTC, its lowest positive figure in three months.

Long-term holders are still accumulating, but just barely. With selling pressure below the October 2 high and buyer participation waning, the price can maintain a higher low while momentum decreases.

A similar pattern occurred in late July, with the metric becoming negative from August 2 to August 30 as long-term holders sold into August’s rally. Still, Bitcoin rose 24% that month. Spot ETFs purchased $3.04 billion over a nine-day inflow streak from August 17 to 27, which may have absorbed that selling.

This time around, funds withdrew $731 million on October 7 and 8, according to SoSoValue flow data, amid this week's crypto sell-off. For a repeat of August's scenario, fund buying must resume or holders need to re-enter.

Key Bitcoin Price Levels for the Divergence

Bitcoin's price has been trending upward since bouncing from $75,041 on September 15. The recent pullback found support at $80,383 on October 8, forming the higher low that underlies the divergence, and has since rebounded.

Long-term holder buying reached its peak around September 20 and 21, when the price moved above $86,616. That area now lies just below $88,086, the 0.618 Fibonacci retracement level where rallies frequently pause, roughly 7% above the current price.

The first step is a daily close above $83,325. Regaining $88,086 could attract holders back. A decline below $80,383 would break the higher low and invalidate the divergence, bringing $75,041 back into consideration.

Analyst's View: The divergence suggests the uptrend still has potential, but both long-term holders and fund flows remain subdued. A daily close above $88,086 could revive both, whereas losing $80,383 would open the door to $75,041.