Why Bitcoin Price Rally of 20% Looks Bearish Beneath the Surface

Bitcoin price has increased by more than 20% over the past month, but the structure behind this rally indicates a different story from the visible price movement.
Derivative traders are taking short positions. Whales are selling as the price rises. Momentum profiles suggest a counter-trend bounce, not the start of a new upward trend. The price does show bullish signals, but the underlying structure tends to be bearish.
Derivative Data Reads Bearish Despite the Rally
Most rallies in recent quarters follow the same pattern. Long traders enter first, leverage increases in perpetual futures markets, funding rates turn highly positive, then the rally continues until a sharp wick forces over-leveraged longs to exit, repeating the cycle. This pattern occurs so frequently that most rallies immediately raise doubts about how much of the crowd is waiting to be ‘cleared out’.
However, this Bitcoin rally does not follow that pattern. Over the past month during the 20% rally, long traders have been scarce.
BTC Funding Trend
Total Bitcoin open interest rose from $30.88 billion on April 30 to $34.26 billion on May 6, an increase of over 11% in just six trading sessions. But the direction of these new positions is more important for assessing market conditions.
Funding rate was at -0.011% on April 30 and still at -0.006% on May 6. Such negative figures during a 20% rally are very rare, confirming that this increase in open interest is dominated by new short positions, not new longs.
Open Interest and Funding Rate
The 8-hour chart further confirms the spot market. We use the 8-hour timeframe to analyze short-term trend behavior. The underlying volume profile of this rally is thinning. From April 14 to May 6, Bitcoin’s price steadily rose while volume declined. This rally is not driven by spot demand but by market distrust and possibly ongoing short liquidations.
Bitcoin 8-Hour Volume Difference
Since there is no over-leveraged long crowd being wiped out, the risk of sharp wicks that usually cap previous rallies is not apparent. But the absence of euphoria-driven longs also means no spot demand breaking resistance. Structurally, this rally is very fragile.
Whale Flows and RSI Divergence Confirm Bearish Signals
This market skepticism is clearly visible in two on-chain signals standing alone.
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Small-scale Bitcoin whales, wallets holding between 1,000 and 10,000 coins, held 4.27 million Bitcoin on April 18, 2026. But by May 6, that amount dropped to 4.19 million Bitcoin. An 80,000 BTC decrease over 18 days aligns with this rally period. Whales are not buying during this phase; they are selling into the rally.
Whale Holdings
The daily chart presents a third bearish signal. The Relative Strength Index (RSI)—a momentum indicator—shows a clear divergence. From January 5 to May 5, Bitcoin’s price formed a clear lower high, while RSI during the same period made a higher high.
This pattern is a hidden bearish divergence, where the price makes a lower high but momentum increases. In a larger downtrend context, hidden bearish divergence indicates the continuation of an existing downtrend, not a reversal. The 20% rally from February lows is seen as a counter-trend bounce within a larger corrective structure. This bearish divergence would only not apply if BTC price surpasses $81,854.
Daily RSI Divergence
Three signals consistently appear. Derivative positions indicate traders expect a correction. The 80,000 BTC decrease from the whale cluster suggests spot market confidence remains low. The hidden bearish divergence in RSI also indicates the major trend is still downward. The 20% rally can technically be sustained because there has been no accumulation of longs to trigger a previous rally, but spot demand to reverse the trend is also absent.
The market is not showing euphoria.
Where Bitcoin Price Levels Could Confirm Bearish Signals
Bitcoin price
BTCUSD
is currently at $81,326, with immediate resistance around $81,810 to $81,854. This area is a critical point to determine whether the rally will continue or reverse downward.
If the daily close is above $81,854, it indicates a strong enough rally to go higher, opening the way to $90,460 as the next key technical level. The $90,460 zone coincides with a descending trendline that has held Bitcoin since the January peak. Breaking above $90,460 would invalidate the larger downtrend structure and signal a true trend reversal.
Bitcoin Price Analysis
Lower levels are quite close together. If Bitcoin is rejected at $81,810 to $81,854, the price could fall to $76,656, the 0.236 Fibonacci support level, which is likely to be a retest area. Falling further below $76,656 would target $73,467 (Fib 0.382), $70,891 (Fib 0.5), and $68,314 (Fib 0.618). If it breaks below $64,645, the next long-term support is at $59,972.
The negative funding rate setup means each rejection at resistance could have amplified effects. Since short positions dominate the perpetual book, failure to break out will not trigger large long liquidations that usually slow down declines. The move back to $76,656 could happen quickly.
The logic is simple: if the daily candle closes above $81,854, the target opens to $90,460. If it fails to break resistance, Bitcoin will return to $76,656.