Bittensor (TAO) has been experiencing significant volatility over the past few weeks, and technical analysis suggests that the cryptocurrency might be heading toward a crucial decision point. After the bulls gave up key support levels in January, TAO has been on a bearish trajectory, with a potential drop to as low as $216 or a temporary bounce toward $390. Here’s a look at the key factors influencing the price action and what traders can expect in the near future.

Market Shift as Bulls Lose Key Support

In January, Bittensor bulls were forced to concede the critical $440-$480 support zone. This support area had been significant over the past few months, but ten days ago, it was retested as resistance. Since then, TAO has shed about 26.7%, marking a clear shift in market sentiment. The bearish trend has only intensified as the cryptocurrency market, particularly altcoins like TAO, has struggled to gain momentum.

The increased volatility in the market has been particularly noticeable over the past two weeks, coinciding with Bitcoin’s fluctuating price, which has been moving within a range near the $100k mark. The lack of bullish conviction from altcoins has further weighed on Bittensor, pushing it into a continued downtrend since December.

Volatility and Market Structure Change

TAO’s volatility has ramped up over the past couple of months, with the Bollinger Bands indicating wider price swings since November. The widening of these bands is a classic sign of heightened volatility on the daily chart, and TAO’s price action has mirrored this, with sharp and quick movements, particularly compared to earlier periods such as August.

Despite an initial uptrend in November, TAO has failed to maintain its bullish momentum. By January, the cryptocurrency saw a significant shift in market structure, with the bears taking control. The key support at $434 was lost, followed by a drop below the $354 level. As of now, TAO has already closed a daily session below $354, which is concerning for bulls looking for a reversal. While there was a 14% bounce from the local lows, this rally appears to be a shallow one, suggesting a brief pause before another leg down.

Liquidation Heatmap and Potential Rejection at $390

The ATR (Average True Range) and Bollinger Bands both suggest increased volatility and heightened selling pressure. The bearish structure is compounded by the liquidation heatmap, which indicates clusters of short liquidations forming around the $380-$400 region. This cluster coincides with the local highs TAO reached during a brief bounce on February 3rd, after which the price retreated sharply.

Given the lack of demand and overall negative market sentiment, a rejection from the $390-$400 resistance zone seems likely. The market structure and selling pressure suggest that a further decline is more probable than a recovery. For swing traders, it might be wise to wait for a test of the $390 region before considering short positions, as the price is more likely to encounter resistance in this range.

What’s Next for Bittensor?

The future of Bittensor remains uncertain, as the cryptocurrency faces a crossroads. With a lack of demand and bearish market conditions, it’s possible that TAO could continue its downward trajectory, potentially testing support at $216. This level is seen as a critical point for bears to maintain control.

On the other hand, if TAO can find enough support and volume at the $390 resistance zone, a temporary bounce could occur, offering a short-term opportunity for traders. However, the broader market conditions remain volatile, and until there is a clear change in sentiment, caution is recommended.

For now, traders should monitor TAO’s behavior closely, especially around the $380-$400 range, for signs of a potential rejection or breakout. With heightened volatility and uncertain market sentiment, Bittensor’s price action will likely remain erratic in the short term.