Bitcoin Breakout Faces Challenges from Fading Demand and Weak Momentum

Bitcoin's recent price surge has brought it back to the vicinity of its failed breakout level on April 22. The cryptocurrency is currently trading at $79,098, just below the upper boundary of an ascending channel that has held since late February.

The chart looks bullish, but three on-chain signals suggest that US institutional demand is fading even as the price rises. A momentum divergence indicates a weakening trend, with Bitcoin's Relative Strength Index (RSI) close to confirming a lower high. This pattern often precedes a trend reversal.

A second warning comes from the Coinbase Premium Index, which compares Bitcoin's price on Coinbase against other exchanges and serves as a proxy for US demand. The premium index has dropped to 0.020 even as price climbed back, indicating that US buyers are walking away. History shows that this divergence resolves with price catching down to demand.

The open interest and funding rates also show a decrease in short-squeeze fuel, which is essential for breaking through resistance. Open interest has dropped to $32.89 billion from $34.02 billion on April 22, and the funding rate has compressed to -0.002% from a deeply negative -0.021%. This means that there is less fuel for a potential breakout.

A clean 8-hour close above $79,510 would confirm a breakout, but if it fails, the next support zone is around $76,074. If the Coinbase Premium signal plays out as it did between April 14 and April 17, the first downside zone is $76,074. A break below opens up $73,948 and $72,230.