Is Hyperliquid (HYPE) about to break below $40 as bearish signals build?

The cryptocurrency market has continued its poor start to the week as the major cryptocurrencies are currently in the red.

Bitcoin, the leading cryptocurrency by market cap, is trading around $80,700, down by less than 1% in the last 24 hours.

Meanwhile, Ether has dropped below $2,300 after losing 2% of its value since Monday.

HYPE, the native coin of the Hyperliquid DEX, is also down by 1.5% and is now trading below $42, breaking below its rising trendline support.

The bearish narrative is supported by weakening derivatives metrics. Technical indicators also show early signs of weakness, suggesting a near-term correction.

Derivatives data support a bearish bias

HYPE is down 1.5% and is now trading at $41. The bearish performance comes as retail traders reduce their exposure to the coin.

According to CoinGlass, Hyperliquid’s OI-Weighted Funding Rate data has flipped negative, reading -0.0008% on Tuesday, indicating shorts are paying longs and projecting a bearish sentiment.

Furthermore, the long-to-short ratio for HYPE now stands at 0.81, its lowest level in over a month.

The ratio declining below one also indicates bearish sentiment in the market, as more traders are betting on the asset price to fall.

While the derivative data support a bearish sentiment, CryptoQuant’s summary data reflects a neutral to slightly bullish outlook for HYPE. 

According to CryptoQuant, the spot and futures markets for HYPE show cooling conditions and buy-side dominance, with mostly neutral conditions across other metrics, supporting a potential recovery.

Hyperliquid price forecast: Sellers could push HYPE below $40

The HYPE/USD 4-hour chart is bearish and efficient as Hyperliquid has underperformed over the past few days.

HYPE’s price broke below the rising trendline a few hours ago and is now trading at $41, after correcting 2.35% the previous day.

If the bearish trend persists and the daily candle closes below this trend support, the sellers could push the price lower towards the 50-day Exponential Moving Average (EMA) at $40.30.

An extended bearish market condition could see HYPE test the 100-day and 200-day EMA at $37.87 and $36.05, respectively, in the coming hours or days. 

Momentum indicators are also flashing early signs of weakness. The Relative Strength Index (RSI) on the 4-hour chart reads 43, slipping below the neutral level.

Meanwhile, the Moving Average Convergence Divergence (MACD) indicators on the same chart showed a bearish crossover on Monday, projecting a negative outlook.

However, if the bulls regain control in the near term, HYPE could extend the advance toward the April 16 high of $45.76.

The ongoing talks between the United States and Iran continue to affect the cryptocurrency market.

A peaceful resolution between the two parties could see Bitcoin, HYPE, and other major cryptocurrencies rally in the near term.