By Key Points
- 3 Bearish Bitcoin Divergence Signals to Watch in August
- RSI, DXY, and USDT dominance are flashing red flags.
- Bitcoin shows bearish patterns similar to 2021’s peak.
- Rising dollar index puts pressure on BTC price.
- Stablecoin flows suggest investors are moving to safety.
Bitcoin is flashing potential warning signs this August as analysts point to three key divergence signals that could spell a market shift. These signs are drawing parallels to the sharp correction seen in 2021.
The first red flag comes from the Relative Strength Index (RSI) on the weekly chart. RSI helps traders measure momentum, and right now, it’s showing a classic bearish divergence: Bitcoin has made a higher high, but RSI has made a lower high.
Bitcoin Price and RSI Divergence. Source: Onur Barik – Techtoken
This is the same pattern that appeared just before Bitcoin’s major pullback in 2021.
Technical analyst Onur Barik believes we might see a similar outcome. “If this plays out like 2021, a clean trendline break followed by a bearish retest could trigger a full structure shift,” he warned.
There’s something eerily familiar forming on $BTC ’s weekly chart.
The current structure closely resembles the top formation from the 2021 bull cycle
• A major Swing High has formed
• RSI is showing clear bearish divergence
• Price is approaching the rising trendline
•… pic.twitter.com/Lbof4bgFDP— Onur BARIK ⚔️ (@OnurSuBrk) August 3, 2025
But others remain skeptical of applying past patterns to today’s market. Ki Young Ju, CEO of CryptoQuant, pushed back on historical comparisons, saying, “The Bitcoin cycle theory is dead.” He argues that new market forces are shaping BTC’s behavior, making past trends less relevant.
Still, technical signals remain a key part of how traders gauge market direction, and this one has their attention.
To understand how altcoin sectors are performing amid this Bitcoin setup, you can explore trends using tools like the Creator Coin Index, which tracks community-led tokens and their relative momentum.
Dollar Strength and Stablecoin Flows Signal Risk-Off Mood
The second bearish divergence comes from the US Dollar Index (DXY). After the Federal Reserve decided to keep interest rates steady, the dollar strengthened, and the DXY hit a two-month high.
As the DXY moved from 96.7 to 98.9, Bitcoin fell from $120,000 to $114,000, highlighting their historically inverse relationship.
DXY and BTC Price Movement. Source: TradingView – Techtoken
Analyst John Kicklighter noted that the DXY is forming an inverse head-and-shoulders pattern, a technical signal that typically suggests more upside for the dollar. That could mean continued pressure on BTC through August.
The $DXY inverse head and shoulders reversal we had at the beginning of the week is seeing a retest of the ‘neckline’ as former resistance, new support pic.twitter.com/A0jbvo3oJ4
— John Kicklighter (@JohnKicklighter) August 1, 2025
Meanwhile, the third divergence comes from USDT Dominance (USDT.D), a measure of how much of the total crypto market is held in Tether, the most-used stablecoin.
USDT.D dropped from over 5% to 4.1% during Q2 but has been climbing again in August, now sitting at 4.4%. Rising dominance suggests traders are exiting volatile positions and parking funds in stablecoins, a classic risk-off behavior.
Bitcoin and USDT.D Price Action. Source: TradingView – Techtoken
Investor Niels predicts this trend may continue. “USDT dominance could go around 4.7%-4.8% in the coming weeks. This’ll drain liquidity from coins and could result in a sharp correction. But it’ll be a golden buying opportunity similar to April 2025,” he explained.
USDT dominance could go around 4.7%-4.8% in the coming weeks.
This’ll drain liquidity from coins, and could result in a sharp correction.
But it’ll be a golden buying opportunity similar to April 2025.
Once USDT dominance hits 4.7%-4.8%, the downtrend will start again and… pic.twitter.com/qLQNtkVFQN
— Niels (@Web3Niels) August 3, 2025
This cautious sentiment is also reflected in how newer token projects are being treated. For instance, the Pi Network token lockup has become a key focus for investors looking for safety and utility in a market full of uncertainty.
Historical Patterns Hint at a Rough August for Bitcoin
Zooming out, seasonal trends provide additional context, and they’re not in Bitcoin’s favor.
Historically, Q3 has been Bitcoin’s weakest quarter, and August is typically the worst-performing month within that quarter.
That seasonal weakness, combined with technical divergences, gives more weight to the bearish scenario analysts are warning about.
If RSI divergence plays out, DXY continues its rally, and USDT.D keeps climbing, the setup for a market correction is hard to ignore.
However, in the past, such corrections have often been followed by strong accumulation phases, especially from institutional players and long-term holders.
In 2021 and 2022, major pullbacks in August were followed by large spot buy-ins in September and October. If that pattern repeats, August could serve as a pivotal month, not just for downside risk, but for long-term accumulation opportunities.
That outlook aligns with broader altcoin trends. For example, despite recent criticism, 62% of Solana meme coin holders are still standing strong, as seen in this Solana community report.
Similarly, Ripple’s $15 billion valuation reflects confidence in long-term fundamentals despite short-term volatility, as covered in our Ripple analysis.
And don’t overlook crypto threats. Recent incidents, such as the North Korean NFT hack, are prompting some investors to adopt more defensive positions, reinforcing the growing trend of stablecoin dominance.
Investors are advised to closely monitor these divergence indicators and brace for increased volatility in the coming weeks.
For active traders, it may be a time to tread carefully. For long-term believers, it might be the buy-the-dip window they’ve been waiting for.
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