Bitcoin price at risk as bearish divergence emerges and hash rate declines

Bitcoin’s price is facing potential risks of a bearish breakout as it forms a bearish divergence and its hash rate declines, signaling potential downside in the near term.

Bitcoin was trading at $94,296, showing little movement as the market digested the latest U.S. economic data, including strong job growth and a drop in the unemployment rate. These factors caused a decline in U.S. equities, with the Dow Jones and Nasdaq 100 both falling significantly.

On the daily chart, Bitcoin has formed a head and shoulders pattern, a classic bearish technical signal. The neckline for this pattern is at $90,952. If the price breaks below this level, it could trigger further downside momentum. Bitcoin’s Relative Strength Index (RSI) and MACD indicators have both shown signs of a bearish divergence, signaling weakening momentum. The MACD histograms have dropped below the zero line, suggesting that selling pressure could outweigh buying interest in the near term.

Bitcoin’s hash rate has been declining, falling from a 30-day high of 911.88 TH/s to 750 TH/s. The hash rate measures the speed at which mathematical puzzles in the Bitcoin network are solved and is often seen as a reflection of network security and miner confidence. A retreat in the hash rate may suggest reduced miner participation, which could indicate bearish sentiment within the Bitcoin network.

The number of active Bitcoin addresses has also dropped from 900,000 to 775,000, showing that fewer traders are active, with some likely opting to sell their holdings. This decline in network activity often accompanies a price pullback or consolidation.

The stronger-than-expected U.S. economic data, including job growth and rising bond yields, is leading to a sell-off in both equities and cryptocurrencies. The rising bond yields—particularly in the 30-year, 10-year, and 5-year yields—suggest that the market expects the Federal Reserve to continue its hawkish stance, which is traditionally negative for riskier assets like Bitcoin.

Recent data also shows significant outflows from Bitcoin-related financial products, such as spot Bitcoin ETFs. Over the past two days, $572 million in outflows have been recorded, which could reflect waning investor confidence or profit-taking behavior.

The head and shoulders pattern’s neckline at $90,952 is a crucial level to watch. If Bitcoin breaks below this support, the price could see further downside. If the bearish trend continues, Bitcoin could find support at the 200-day moving average at around $78,285, and potentially the March 2024 high of $73,985. These levels could help stabilize the price if the downtrend accelerates.

Despite the bearish signals, there is still an ongoing bullish pennant pattern forming on Bitcoin’s weekly chart. This pattern will remain intact as long as Bitcoin stays above the $90,000 level. If Bitcoin can hold above this key level, there is still potential for a continuation of the bullish trend.

Bitcoin is at a crossroads, with both bearish and bullish factors in play. The bearish divergence, declining hash rate, and macroeconomic pressures are signaling potential downside in the short term, especially if Bitcoin breaks below the $90,952 support level. However, Bitcoin’s weekly chart still holds promise as long as the price stays above $90,000, and the ongoing bullish pennant pattern suggests that a breakout could be possible if the bulls regain control. Investors should keep a close eye on these key technical levels for further direction.