Key takeaways:
Bitcoin shows bearish divergences on multiple time frames, signaling weak bullish momentum and a potential pullback.
Some traders anticipate a rally above $112,000, but increasing sell pressure and liquidity sweeps suggest the breakouts are traps.
Bitcoin (BTC) price rallied to $110,500 on Thursday, but the cryptocurrency is encountering a ceiling as multiple bearish divergences flash across different timeframes.
On the 15-minute, one-hour, and four-hour charts, technical analysts have flagged divergence signals, where the price continues to rise while momentum indicators, such as the relative strength index trend lower. This suggests a weakening bullish drive, raising the risk of a near-term pullback.
Zooming out to the one-day chart reinforces the cautious outlook. In May, a clear bearish divergence emerged between price and momentum indicators, aligning with Bitcoin’s all-time high of $111,800. Although BTC briefly dipped below $100,000 since then, the divergence remains intact, suggesting that underlying bearish pressure could still exert influence. The immediate target below remains between $107,500 and $106,000.
This bearish bias was reinforced after Friday’s US Non-Farm Payroll (NFP) data, which came in hotter than expected. While the labor report initially helped push BTC toward $110,000, bulls failed to maintain that breakout. The rejection at this key psychological level may signal exhaustion at the current range highs.
Interestingly, funding rates remain neutral. In an X post, Vetle Lunde of K33 Research pointed out that the perpetual futures funding rate remains flat even with BTC brushing against its all-time high range. This lack of aggressive long positioning shows traders may not be fully convinced of a sustained breakout, which aligns with the current technical divergences.
Related: Bitcoin price rallied 80% the last time BTC funding rates flipped red
Was Bitcoin’s rally to $110,000 a bull or bear trap?
As Bitcoin consolidates just below the $110,000 level, traders remain split on the next big move.
Pseudonymous trader Byzantine General shared a chart noting that Bitcoin may be coiling for a $112,000 break based on futures data. The setup suggests open interest breaking out with the price, which historically has led to a higher target.
While market order books are beginning to reflect increased sell pressure. A cluster of high-taker sell volume appeared around the $110,000 zone, typically a sign that investors could be closing positions at resistance. This aligns with recent behavior near previous all-time highs, where rejection zones often draw liquidity for exits.
Meanwhile, trader KillaXBT pointed out that Bitcoin has been executing liquidity sweeps above resistance levels and below supports, only to reverse swiftly. These fakeouts are often designed to flush out leveraged positions before a real directional move unfolds.
Related: Bitcoin holding $109K proves bulls control the market: Will new highs happen today?
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.