Bittensor (TAO) has made a significant move as it has crossed the psychological resistance level at $300 while the market pulls the price down. As the interest around AI tokens grows, TAO is holding strong with roughly 200 million in daily trading volume despite having a relatively small market cap of $2.7 billion.
Bittensor (TAO) holds above $300 as sell pressure mounts
Bittensor has crossed the $300 psychological resistance, which many traders have been waiting for. With this impeachment, the market is once again going into a selloff, and TAO is currently trying to hold above this level.
However, since the market has now entered a period of weakness due to the uncertainty regarding the upcoming impeachment process, the bullish sentiment is beginning to fade away. Currently, TAO seems to be working to consolidate itself in the area of $300, as bulls try to find support in this area, yet the pressure on this support zone remains.
One of the principles of technical analysis states that the previous level of resistance must hold as support after a breakout if a fakeout scenario is to be avoided.
As things stand now, it appears that the market has entered an equilibrium stage where the buyers try to defend the breakout while the bears try to drive the price lower to reverse it.
A continuation of the breakout and consolidation above the $300 area will show that TAO can still attract enough investment, while the inability to do so might lead to further decline.
TAO makes stunning recovery after Covenant AI exit
TAO crossing the $300 level is quite an impressive feat; however, there is something that is much more impressive than this. For instance, recovering from a price level of $238 within a month is commendable. Why? Back in April a major subnet operator known as Covenant AI exited the network, stating that the network was centralized, although they were promoting their brand as decentralized.
Covenant AI accused a small group of influencing or controlling key decisions within the ecosystem, despite the project’s broader decentralization narrative. The accusations included claims of unilateral governance actions, changes to subnet incentives, and a lack of transparent community participation in certain decisions.
A simple reflex action turned into a ripple effect
A reaction that initially stemmed from an emotional response soon turned into a larger market event, leading to a strong decline in prices for many cryptocurrencies. Once the prices were starting to breach some crucial support levels, a large batch of leveraged long positions got sold out and thus reduced the total exposure of investors within a fairly short period of time.
Such a phenomenon only strengthened the downward movement since the selling pressure led to even more liquidations and, therefore, continued downward price pressure. The consequence was the unwinding of excessive bullish positions, where tens of millions of dollars got wiped out as a result of a strong correction in the prices of cryptocurrencies.
As for the general market conditions at the time, liquidity was poor and there was not enough bid demand to support prices at a stable level. On top of that, sentiment toward the economy was turning negative, which is why traders were seeking to reduce their risk exposure.
TAO could touch $400 before crashing again
As shown in the chart above, TAO is trading inside a rising wedge, which is a bearish pattern. A rising wedge is a technical chart formation that tends to signal a reversal from an uptrend into a downtrend, though in rare cases it can form within a bearish trend.
Rising wedges are formed by price movements in an ascending fashion between two converging trend lines, one connecting successively higher highs and the other connecting successively higher lows. Both trend lines moved diagonally upward, but the line connecting successively higher lows is steeper, indicating that momentum is declining.
At first glance, the rising wedge might appear as a continuation pattern since price movement is still going upwards. However, what needs to be taken into account is the fact that every time the price reaches a new high, it does not have enough strength to keep pushing as it did when it made its previous high; this shows that the buying pressure is gradually weakening.
Besides, it is typical for a volume level to decrease during such movement since there are not many participants taking part in the process.
At the later stage of the rising wedge formation, price tends to move in a narrower range since trend lines become closer to each other. Such development indicates hesitation and weakening buying interest. And finally, when the trendlines come in touching distance, the prices break out from the rising wedge and start to crash again.
In the TAO case, the apex of the wedge is not completely formed as such; the prices will continue to make higher highs and higher lows inside the rising wedge. As such, there is a high chance that TAO could hit a price above the $400 level. But once the wedge is fully formed, a crash will be followed.