Bitcoin Faces Pullback Risk Despite Rally to $110,500; Bearish Divergences Signal Exhaustion

Key takeaways:

  • Bitcoin shows bearish divergences across multiple timeframes, indicating weakening bullish momentum and a potential near-term pullback.

  • While some traders anticipate a rally above $112,000, increased sell pressure and liquidity sweeps suggest breakouts may be trapping buying interest.

Bitcoin (BTC) staged a rally to $110,500 on Thursday but encountered resistance, triggering bearish technical signals as momentum indicators diverged from higher prices.

Technical analysts identified divergence signals on the 15-minute, hourly, and four-hour charts. In divergence, the price continues to rise while momentum indicators like the Relative Strength Index (RSI) decline, suggesting weakening bullish drive and escalating downward counter-pressure.

Bitcoin Price Action & Bearish Divergence Analysis
Bitcoin 15-min, 1-hour, 4-hour, 1-day bearish divergences. Source: Cointelegraph/TradingView

The one-day chart amplifies concerns. A bearish divergence formed months ago between price and momentum, coinciding with Bitcoin’s peak near $111,800. Although BTC retreated near $100,000, the divergence structure persists, implying residual bearish influence. Immediate support is likely between $106,000 and $107,500.

This bearish technical backdrop strengthened after Friday’s robust US Non-Farm Payroll data. While the positive employment report briefly pushed BTC towards $110,000, bulls struggled to sustain the breakout. The rejection at this significant psychological barrier suggests potential exhaustion at current resistance levels.

Market funding rates offer conflicting signals. K33 Research’s Vetle Lunde observed flat perpetual funding rates despite BTC challenging its all-time high range. The absence of sharp funding rate movements implies trader sentiment remains cautious, questioning the conviction for a sustained breakout against bearish divergence cues.

Bitcoin Funding Rates Analysis
7-day average funding rates. Source: Vetle Lunde/X

The $110,000 Climb: Bull Trap Possibility?

With Bitcoin consolidating below $110,000, market participants remain divided on the next directional movement.

Pseudonymous trader Byzantine General suggested BTC may be positioning for a $112,000 test based on futures data flow. The theory posits that expanding open interest during price attempts historically precedes further gains.

Conversely, order book analysis paints a different picture. Maartunn’s research highlights concentrated sell volume near $110,000. This pattern often represents profit-taking by traders who entered positions during the recent ascent, drawing liquidity toward the resistance zone.

Bitcoin Taker Sell Volume Analysis
Bitcoin Taker Sell Volume. Source: Maartunn/X

Additional evidence includes frequent “liquidity sweeps” noted by KillaXBT. This phenomenon involves rapid price movements testing resistance or support that trigger automatic order fills, subsequently reversing momentum to flush out leveraged positions before a true directional move may occur.

This article is for informational purposes only and does not constitute investment advice. Engaging in cryptoasset investments and trading involves substantial risk.