Bitcoin price in danger due to formation of bearish divergence and decline in hash rate
Bitcoin price remained within a narrow range on Saturday, while the hash rate dropped and a bearish divergence formed, increasing the risk of a bearish breakout.
At the time of writing, Bitcoin (BTC) was trading at $94,296, reacting to the latest report from the Bureau of Labor Statistics, which revealed that the US economy had created over 256,000 jobs, causing the unemployment rate to fall to 4.1%.
Consequently, American equities experienced a decline, with the Dow Jones and Nasdaq 100 indices dropping by 697 and 317 points, respectively.
As predicted by cryptonews.com, the bond market continued its sell-off, resulting in the 30-year yield rising to 5.0%. The 10-year and 5-year yields also increased to 4.76% and 4.57% respectively. These rising yields indicate that the market anticipates a hawkish stance from the Federal Reserve, which usually impacts risky assets like Bitcoin and altcoins.
Meanwhile, data from IntoTheBlock reveals that Bitcoin’s hash rate has decreased in recent days as its price has stagnated. On Saturday, January 11th, its hash rate was 750 TH/s, lower than the 30-day high of 911.88 TH/s and the 30-day average of 793 TH/s.
The hash rate is a crucial metric that measures the speed at which mathematical puzzles in the network are being solved.
Further on-chain data indicates that the number of active Bitcoin addresses has dropped from 900,000 on Monday to 775,000, suggesting that some traders have started selling. For instance, SoSoValue reported that allspot Bitcoin ETFs experienced outflows totaling $572 million over the past two consecutive days.
Bitcoin price forms a bearish divergence
The daily chart reveals that Bitcoin is at risk of a bearish breakout. It has formed a potentially risky head and shoulders chart pattern, with the neckline at $90,952. This pattern is one of the most widely recognized bearish patterns in trading.
Bitcoin’s Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) indicators have formed a bearish divergence pattern. The MACD’s histograms have fallen below the zero line.
Therefore, a break below the neckline of the head and shoulders pattern at $90,950 increases the risk of further downward movement. The first support level in this scenario would be the 200-day moving average at $78,285, followed by $73,985, which was the highest point in March of last year.
On a positive note, as mentioned earlier this week, Bitcoin price is forming a bullish pennant chart pattern on the weekly chart. This pattern will remain valid as long as the price remains above $90,000.
