Bitcoin's $100K Standoff: Deleveraging, Liquidity Reset Looms

Bitcoin has been consolidating near the $100,000 mark, raising questions about the potential for a new rally. Recent data suggests that the cryptocurrency is currently undergoing a deleveraging process, as indicated by the 90-day Aggregated Open Interest Delta across 17 major exchanges. This trend often precedes price drops or extended sideways movement, as positions are closed or liquidated.

The Open Interest to Market Cap ratio has risen significantly since early 2024, suggesting increased Bitcoin market risk compared to the more balanced conditions during the 2021 Bull Run. This higher ratio could elevate the risk of further price drops, impacting those in long positions. Recent activities show significant deleveraging, signaling a wave of liquidations and the closure of institutional positions, akin to a liquidity reset.

Analysts have identified significant liquidity pooled at $93,700 and $98,800. After yesterday's news, there was a short-term recovery for BTC followed by a decline. This initial drop could aim for the $93,700 level to absorb this "liquid liquidity," where buy orders are waiting. If BTC does not drop to $93.7K, it might signal strong underlying support or bullish sentiment, where buyers step in at higher levels, preventing a deeper fall. This scenario could lead to a quicker recovery or even a price surge.

The Trader Sentiment Gap on the BTC showed a notable shrinkage to a lower level, particularly when filtered at 0.5, indicative of a minimal sentiment gap between top traders and retail traders. Historically, such a contraction often precedes a significant price movement. On February 12, following a gap reduction, Bitcoin's price sharply dropped from $96,650 to a low of $94,000 before rebounding. This pattern suggests that a narrow sentiment gap may lead to initial price declines, followed by a recovery, reflecting shifts in trader behavior and market dynamics.

However, a significant trend where Short-Term Holders (STHs) now possess 4 million Bitcoin has emerged. This represents 46% of the 2017 peak and 86% of the 2021 peak, having accumulated 1.6 million BTC since September. The increasing number of Short-Term Holders (STHs