When the market rebounds: understanding bullish divergence in crypto

In cryptocurrency trading, there is a very common pattern: after Bitcoin and other digital currencies plummet for months, suddenly everything changes. Prices begin to recover sharply and market sentiment shifts 180 degrees. This phenomenon is known as a bullish divergence, and understanding how it works is key for any trader.

How is a bullish divergence formed?

The process is simpler than it seems. Imagine that over a long period, the price of a cryptocurrency keeps falling. Desperate investors start liquidating positions, generating more panic and more sales. It’s a vicious cycle: the lower the price, the more people panic and sell, accelerating the decline.

But here’s the interesting part: there comes a moment when sellers exhaust their capacity or willingness to keep selling. That is, the point where almost no one wants to sell anymore. At that precise moment, strategic buyers begin to enter. They see historical prices, consider it the right time to accumulate assets, and start buying.

The game changer

When these new buyers acquire significant volumes, the price begins to recover. This recovery triggers a chain reaction: other investors who had been out of the market see that something is changing, regain confidence, and also start buying. The bullish divergence precisely describes this dramatic turn, when confidence returns and prices rise rapidly.

What you should keep in mind

It’s important to be realistic: a bullish divergence does not guarantee that the price will keep rising indefinitely. The cryptocurrency market is extremely volatile and can turn without warning. A bullish divergence is an opportunity, not a promise.

That’s why you should never risk more than you can afford to lose. These price changes can be as unpredictable as they are unexpected. Always keep your risk management as your number one priority.