Bitcoin News Today: Bitcoin drops 6.72% amid liquidity sweep but open interest rises, hinting at potential recovery

Bitcoin has recently experienced a sharp correction from its all-time high of $124,474, prompting discussions among traders and analysts about the underlying market dynamics [1]. The move, which saw a 6.72% drop below $115,000, has been attributed to increased profit-taking by short-term holders and a shift in short positions. Andre Dragosch, Head of Research at Bitwise Europe, noted that while profit-taking has increased, the volume of these trades has been declining over time, suggesting that aggressive selling may not continue [1].

The correction aligns with patterns observed during previous all-time highs, where traders typically lock in gains as prices reach psychological resistance levels. However, the recent drop appears to have been more pronounced than expected, prompting some analysts to forecast a potential decline toward $110,000 or below [1]. Shubh Varma, co-founder and CEO of Hyblock, highlighted the role of liquidity dynamics in shaping Bitcoin’s price action over the weekend. According to Varma, liquidity had built up on the downside, creating visible pools of potential liquidation targets, which were subsequently swept during the weekend period [1].

This liquidity sweep, Varma explained, occurred alongside the emergence of supply in the orderbook and onchain. Large Ethereum unstaking events contributed to the available supply, but institutional demand remained robust, particularly from digital asset treasuries (DATs). Several institutions announced major BTC and ETH purchases during the previous week, with demand exceeding supply and helping to fuel the upward movement [1].

Despite the weekend sell-off, the market appears to be stabilizing. The uptick in open interest, an indicator of market participation, suggests that buying interest is returning. Varma emphasized that large amounts of open interest were created around the time of the liquidity sweep, which could serve as strong support as both longs and shorts have positioned themselves in that area. The trapped short positions may further reinforce the potential for a bullish reversal [1].

On the technical front, Bitcoin has demonstrated a clear Change of Character (CHoCH) formation on the 30-minute chart, reinforcing its bullish intent as it moved past recent support levels [2]. The 4-hour chart shows a retracement into a key liquidity area aligned with the slow trend structure, reinforcing its potential as a strategic entry point for long positions [2]. Analysts have noted that the price action supports a continuation of the upward trend, with the key 3,323 zone having been swept by buying pressure, triggering a reversal in short-term positioning [2].

The broader market structure remains healthy, with steady liquidity, rising relative volume, and no signs of euphoria or blow-off tops—indicators typically associated with sustainable bullish phases [3]. This has led to renewed optimism among traders, who see the current price correction as a consolidation phase rather than a bearish reversal. The combination of institutional demand, strong open interest, and favorable technical patterns suggests that Bitcoin is well-positioned for a recovery [3].

While short-term traders have faced liquidations following a sharp pullback after the Producer Price Index (PPI) data release, the broader technical setup appears to favor a continuation of the recent upward trend [3]. The divergence between price weakness and rising open interest may indicate a shift in market sentiment, with buyers stepping in to absorb the selling pressure [3].

Overall, the recent developments in Bitcoin’s price action, liquidity dynamics, and market participation point to a potential bullish reversal. Analysts are closely monitoring open interest and institutional demand for further confirmation, but the technical and onchain indicators suggest that the recovery is gaining momentum [1][2][3].

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[1] Bitcoin ‘Liquidity Zones Swept’ But Uptick in Open Interest Hints at BTC Recovery (https://cointelegraph.com/news/bitcoin-liquidity-zones-swept-but-uptick-in-open-interest-hints-at-btc-recovery)

[2] BTCUSD Trade Setup – 30m Chart (https://www.facebook.com/groups/2854679244843623/posts/4007261186252084/)

[3] Trend Lines — Trading Ideas on TradingView (https://www.tradingview.com/ideas/trendline/)