Bitcoin's Potential Post-Downtrend Breakout and Strategic Entry Points

Bitcoin’s recent price action has sparked intense debate among traders and analysts, with technical and on-chain signals converging on a potential reversal after weeks of bearish pressure. The cryptocurrency’s ability to break above a critical downward trend line on September 2, 2025, marks a pivotal moment in its short-term trajectory. This breakout, coupled with diverging market sentiment and on-chain dynamics, suggests a strategic inflection point for investors.

Technical Reversal Signals: A Confluence of Indicators

Bitcoin’s price closed above a key descending trend line for the first time since mid-August, a development many traders interpret as a bullish reversal confirmation [1]. This move is reinforced by a bullish divergence on the RSI, where price lows have fallen below prior levels while the RSI has formed higher lows—a classic precursor to upward momentum [1]. On-chain data further validates this narrative: long liquidations have surpassed short liquidations by approximately $7 million, signaling that overleveraged long positions have been flushed out, potentially clearing the path for a rebound [3].

A critical technical pattern to monitor is the falling wedge, which Bitcoin appears to be testing. Historical data suggests that a successful breakout from this pattern could drive the price up by 20-30% within weeks, with resistance levels around $112,000–$114,000 acting as a key battleground [4]. If this cluster holds, the next target could be $120,000, a level last seen in early 2025 [2].

Market Sentiment Divergence: Fear vs. Optimism

While technical indicators point to a potential reversal, market sentiment remains mixed. Retail traders, however, are showing cautious optimism. A recent poll revealed that 56% of retail participants believe Bitcoin could break the historical September slump and finish higher by month-end [5]. This optimism is supported by a 4% three-day price gain and increased trading activity in key resistance zones [1].

Conversely, macroeconomic risks persist. The Federal Reserve’s hawkish stance and Bitcoin’s weakening inverse correlation with the U.S. dollar introduce volatility [2]. However, derivative data suggests the market may be nearing a bottom. The Bitcoin options skew hit a four-month high, indicating excessive fear—a condition historically followed by strong rebounds [4]. Meanwhile, stablecoin demand in China remains stable, suggesting limited capital flight [4].

Strategic Entry Points and Risk Management

For investors considering entry, the $112,000–$113,700 resistance cluster represents a critical test. A sustained break above this range could trigger a surge toward $120,000, while a failure to hold would likely see a retest of the $100,000–$107,000 support zone [2]. This latter level has historically attracted institutional buying, and a breakdown below it could lead to prolonged weakness as short-term holders (STHs) offload positions [2].

On-chain metrics add nuance to this analysis. The MVRV ratio for STHs has breached the lower Bollinger Band, a rare event observed during major bull market bottoms in August 2024 and April 2025 [3]. This, combined with the STH realized price aligning with the spot price, suggests a potential support floor [3]. However, weak momentum indicators like the ADX and RSI underscore the need for caution [2].

Conclusion: A High-Probability Setup?

Bitcoin’s technical and on-chain landscape presents a compelling case for a post-downtrend breakout. The convergence of trend-line breaks, RSI divergence, and on-chain liquidation dynamics suggests a potential reversal. However, macroeconomic headwinds and the need for institutional validation (e.g., ETF approvals) remain critical variables. For now, the $112,000–$114,000 range will be the key battleground—hold it, and the bulls gain momentum; break it, and the bears regain control.

Investors should remain nimble, using the current volatility to assess risk-reward ratios while keeping a close eye on both technical execution and macroeconomic catalysts.

**Source:[1] Bitcoin Price Breaks Through a Key Daily Downtrend, [https://cointelegraph.com/news/bitcoin-price-stages-2-week-downtrend-breakout-with-112k-next-target][2] Bitcoin's Critical Support Levels and the Path to a Potential Reversal [https://www.ainvest.com/news/bitcoin-critical-support-levels-path-potential-reversal-technical-risk-management-analysis-2508/][3] Bitcoin short-term holders spark rare BTC price bottom signal at $107k [https://cointelegraph.com/news/bitcoin-short-term-holders-spark-rare-btc-bottom-signal-107k][4] Was the Bitcoin price bottom $114.7K?: Data suggests it's time for a reversal [https://cointelegraph.com/news/was-the-bitcoin-price-bottom-dollar114-7k-data-suggests-it-s-time-for-a-reversal][5] Bitcoin Gains As 'September Slump' Remains Uncertain [https://stocktwits.com/news-articles/markets/cryptocurrency/bitcoin-gains-as-september-slump-remains-uncertain/chwTDJeRd8K]