Bitcoin News Today: Bitcoin's Liquidity Lull Sparks Short Squeeze Speculation

Bitcoin’s recent price action has revealed an inverse relationship between exchange liquidity and price movements, as the digital asset’s rally has coincided with declining liquidity on key trading platforms. This pattern has raised concerns among analysts and traders, who are closely monitoring the market structure for signs of instability. According to onchain analytics platforms like CoinGlass and CryptoQuant, total long liquidations have reached nearly $500 million in the past week, with Bitcoin trading below previous all-time highs seen in January 2025. This has triggered a debate over whether the current correction is a short-term pullback or a deeper bearish reversal.

The market’s liquidity dynamics have also shifted, with traders reporting that most downside liquidity has already been “hunted,” leaving limited room for further downward movement. This has led some analysts to speculate that the next phase could involve short squeeze dynamics. Notably, trader BitBull has predicted a potential rebound to the $114K–$115K range this week, suggesting that short liquidations could act as a catalyst for a broader rally. Similarly, analytics account TheKingfisher has pointed out a “huge wall” of short exposure at the $114,000 level, which may become a focal point for price action in the coming days.

On the technical front, Bitcoin has fallen below key moving averages, including the 100 EMA and the 200-day SMA. These levels are traditionally seen as critical support zones in bull markets. Analysts like Axel Adler Jr. of CryptoQuant have highlighted the 100K–107K range as the next immediate support area, where the cost basis of short-term holders could provide a floor for the price. Below this range, additional support is expected around the 92K–93K level, which reflects the cost basis of those who have held Bitcoin for 3 to 6 months. These levels are closely watched as traders assess whether the current correction can be contained or if a deeper pullback is likely.

Meanwhile, broader onchain data suggests that the market is in a classic capitulation phase, with newer investors—those holding Bitcoin for less than a month—experiencing average unrealized losses and beginning to sell. This has triggered a redistribution of Bitcoin holdings to more seasoned investors who have a lower cost basis and a higher risk tolerance. According to CrazzyBlockk, this structural shift could ultimately strengthen the support base for future price recoveries. However, this remains contingent on the market holding above the 20-week EMA, which is currently near $108,000 and has historically served as a dynamic support level during bull runs.

The broader implications of declining liquidity and the current price correction remain unclear, but the market’s structural resilience is evident. Amr Taha of CryptoQuant noted that the recent liquidation of $70 million in BTC longs has led to a significant drop in open interest, suggesting that overleveraged buyers have been flushed out of the market. This could create a healthier environment for future price appreciation if Bitcoin is able to reclaim key levels and trigger short covering. While a short squeeze appears plausible, the absence of such a move thus far points to the potential for further consolidation before the next directional move.

Source: [1] Bitcoin drops under $109K: How low can BTC price go? (https://cointelegraph.com/news/bitcoin-drops-under-109k-how-low-can-btc-price-go-next) [2] Was $124K the top? Bitcoin's price peak signals tell a different story (https://cointelegraph.com/news/was-124k-the-top-bitcoin-price-peak-signals-different-story) [3] Trump's Attempt To Remove Fed's Lisa Cook Puts U.S. Bitcoin Reserve At Risk (https://www.forbes.com/sites/tonyaevans/2025/08/26/trumps-bid-to-oust-feds-lisa-cook-endangers-the-bitcoin-reserve-he-built/) [4] Sequans Plans $200M NYSE Share Sale for Bitcoin Reserves (https://www.bitdegree.org/crypto/news/sequans-to-raise-200-million-for-bitcoin-treasury-via-nyse-share-sale)