Bittensor (TAO) experienced a modest recovery of over 2% on Monday, partially offsetting a prior 5% decline on Sunday. This rebound was primarily fueled by the anticipated halving event, which cuts the daily token emission by 50% to 3,600 TAO.
However, derivatives market signals suggest underlying caution. Open Interest (OI) in futures contracts continues to dwindle, while funding rates have turned negative, reflecting investor hesitancy.
Technically, TAO's short-term outlook leans bearish. A breach of a key support level on the 4-hour chart increases the likelihood of further downward correction, with the next target zone around the S1 Pivot point at $286.
Bittensor Halving Struggles to Ignite Demand
Bittensor's first halving event, a significant milestone, took place on Monday. This event halved the TAO emission rate, reducing it to 0.5 TAO per block. Consequently, the daily supply entering the market has drastically decreased from 7,200 TAO to 3,600 TAO.
This supply reduction could provide price support for TAO, assuming stable or increasing demand. It's important to note that the Alpha reward distribution mechanism—which allocates TAO to miners, validators, and subnet owners at the subnetwork level—remains unchanged and unaffected by the halving.
Contrary to supply-side expectations, the derivatives market paints a less optimistic picture. Open interest in TAO futures contracts has decreased by 1.18% in the last 24 hours, falling to $201.08 million. This decline reflects a contraction of positions and growing caution among traders.
A more striking development is the sharp reversal in the funding rate, which plummeted from a positive 0.0060% to a negative -0.0022%. This shift suggests increasing bearish sentiment, with short positions gaining dominance in the market.
Potential Breakdown Could Send Bittensor to $265
Bittensor has broken down from a symmetrical triangle pattern on the 4-hour timeframe, a pattern formed by two converging trendlines that reflect a period of price consolidation. The recent recovery of this decentralized AI token appears to be a technical pullback, with the price retesting the breached support area—connecting the lows formed on December 1st and 7th—which also coincides with the 50-period Exponential Moving Average (EMA) around $291.
If the price is rejected at this level, selling pressure could resume, potentially pushing the price lower towards the S1 Pivot point at $265, before targeting the lower support zone at the S2 Pivot around $250.
Momentum indicators on the daily timeframe continue to reinforce the negative outlook. The Relative Strength Index (RSI) remains at 42, below the neutral threshold of 50, indicating weak buying strength and an unbroken downtrend. Furthermore, the Moving Average Convergence Divergence (MACD) line and the signal line continue to widen their downward trajectory in the negative territory, reflecting growing bearish momentum.
On the other hand, if Bittensor can reclaim the 50-period EMA at $291, the short-term rebound could extend to the next resistance area at the R1 Pivot around $305.
FAQs
How does the Bittensor (TAO) halving affect the token's price?
The halving reduces the daily supply of TAO entering the market, potentially providing price support if demand remains stable or increases. However, the article suggests that despite the halving, investor caution and bearish sentiment are currently impacting the price.
Why is the Bittensor (TAO) derivatives market showing negative signals despite the halving?
Declining Open Interest (OI) and negative funding rates in TAO futures contracts indicate growing investor hesitancy and increasing bearish sentiment. This suggests that short positions are gaining dominance, counteracting the potential positive effects of the supply reduction from the halving.
What are the key price levels to watch for Bittensor (TAO) based on technical analysis?
The article points to a potential breakdown towards the S1 Pivot point around $265, with further downside risk to the S2 Pivot around $250 if selling pressure continues. A rejection at the $291 level, which coincides with a previous support area and the 50-period EMA, could trigger further downward movement.
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