Bitcoin News Today: Bitcoin's Liquidity Crossroads: A Buying Opportunity or a Trap for the Eager?

Bitcoin's recent price correction has drawn significant attention from analysts, many of whom view the pullback as a natural and expected characteristic of an ongoing bull market. The cryptocurrency fell below $115,000 for the first time in nearly two weeks, triggering over $360 million in long liquidations as traders on both centralized and decentralized exchanges faced margin calls. According to Hyblock co-founder and CEO Shubh Varma, the decline was partly attributed to liquidity grabs that occurred over the weekend, during which thin markets left orderflow imbalances exposed. “Liquidity sat below, slippage spiked, and both 1% and 2% bid-ask depth flipped bearish,” Varma explained, noting that these conditions led to a cascade of liquidations in key zones around $115,000 [1].

The pullback, however, appears to have been met with substantial buying interest from long-term holders and institutional investors. Data from Hyblock and other on-chain analytics tools indicate that open interest remains concentrated around the $120,000 level, where both bullish and bearish positions were opened in recent weeks. Varma pointed out that short positions at this level are currently “trapped,” suggesting that the price may find support before continuing its upward trajectory [1]. Meanwhile, Bitwise European Head of Research Andre Dragosch highlighted the pattern of profit-taking among short-term holders but noted that the overall trend showed a reduction in these positions over time [1].

Bitcoin’s price action is also being closely analyzed in the context of global liquidity conditions, particularly the M2 money supply, which measures the total amount of cash, savings, and near-cash assets in circulation. Historical correlations suggest that Bitcoin tends to perform strongly when liquidity expands and weakens when it contracts. With global liquidity currently at a critical juncture—trading near a long-term resistance line—analysts believe the next move in Bitcoin’s price could be driven by a breakout or breakdown from this range. A breakout would likely fuel further gains toward six figures, while a breakdown could prolong the current period of consolidation [2]. The M2 liquidity index has historically been a leading indicator of Bitcoin’s major price cycles, reinforcing the importance of monitoring central bank policies and global monetary flows [2].

Despite the recent volatility, some analysts remain optimistic, pointing to the broader structural factors that continue to underpin Bitcoin’s long-term value. For instance, institutional demand has remained robust, with several firms announcing significant BTC and ETH purchases in the past week. These purchases have not only absorbed the increased supply from large unstaking events but also exceeded demand levels, contributing to the upside momentum seen earlier in the summer [1]. Additionally, the Coinbase Bitcoin Premium Index reached monthly highs during the recent decline, indicating that U.S. institutional investors are still willing to pay above market prices for Bitcoin—a sign that accumulation is continuing amid the short-term selloff [3].

Looking ahead, the path of least resistance for Bitcoin appears to depend on whether it can hold above key support levels, particularly the $114,700 range. If this level is maintained, it could signal the completion of a deleveraging process that has already wiped out overleveraged long positions and left the market more balanced. However, a break below this level could trigger further liquidations and prolong the current period of uncertainty [3]. With the Federal Reserve’s Jackson Hole symposium approaching, market participants are also closely watching for any signals that may influence interest rate policy and, by extension, global liquidity conditions [4].

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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] Will Global Liquidity Trigger the Next BTC Price Bull Run? (https://coinpedia.org/price-analysis/bitcoin-price-analysis-will-global-liquidity-trigger-the-next-btc-price-bull-run/)

[3] $360M in Crypto Longs Liquidated as Bitcoin Falls Below $116K (https://cryptonews.com/news/360m-in-crypto-longs-liquidated-as-bitcoin-falls-below-116k-is-this-the-top/)

[4] Bitcoin analysts point to 'manipulation' as BTC price falls to 17-day low (https://cointelegraph.com/news/bitcoin-analysts-point-to-manipulation-as-btc-price-falls-to-17-day-low)