Bitcoin's Price Recovery Capped at $90,000 by Leverage and Liquidity Concerns

Bitcoin's (BTC) price recovery in the second quarter of 2025 has shown promising signs, with a 3.77% return in April following consecutive drawdowns of 17.39% and 2.3% in February and March. Despite forming fresh yearly lows at $74,500, BTC is currently closer to $90,000 than its new range bottom. The higher time frame (HTF) market structure has achieved its first breakout of 2025, fueling optimism among bulls for significant upward momentum. However, several factors could limit BTC’s gains over the next two weeks, potentially capping its price at around $90,000.

One key factor is the need for spot volume rather than just leverage-driven trading. A cooldown period in the futures market has been identified, with the BTC-USDT futures leverage ratio dropping by 50%. While de-leveraging in the futures market is a positive development over the long term, derivatives traders have taken control of the market at the time as well. Bitcoin researcher Axel Adler Jr. pointed out that Bitcoin’s cumulative net taker volume spiked to $800 million on April 11, hinting at a surge in aggressive buying. BTC price also jumped from $78,000 to $85,000 within three days, confirming previous historical patterns where high net take volume triggers price rallies. However, Maartunn, a community analyst at CryptoQuant, confirmed that the current rally is a “leverage-driven pump,” indicating that retail or spot traders are still not as relevant.

Bitcoin apparent demand is on a recovery path, but it is not net positive yet. Historically, 30-day apparent demand can move sideways for a prolonged period after BTC reaches a local bottom, leading to a sideways chop for the crypto. Thus, it is less likely that Bitcoin could breach $90,000 in the first attempt after dropping close to 20% until there is collective buying pressure from both spot and futures markets.

Another factor that could limit BTC’s gains is the presence of large liquidation clusters between $80,000 and $90,000. Data from CoinGlass highlighted significant cumulative long and short liquidation leverage between these price points. Taking $85,100 at the base price, total cumulative short positions at risk of liquidation are at $6.5 billion if BTC price hits $90,035. On the other hand, $4.86 billion in long orders will be wiped out if BTC drops to $80,071. While liquidation clusters do not determine directional bias, they can create long or short squeezes, baiting traders on either side of respective trades. With such high capital at risk under $90,000, it is possible that Bitcoin may target each cluster before moving toward the dominant side.

In summary, while Bitcoin's price recovery in the second quarter of 2025 has shown promising signs, several factors could limit its gains over the next two weeks. The need for spot volume rather than just leverage-driven trading, the presence of large liquidation clusters between $80,000 and $90,000, and the current state of Bitcoin apparent demand all suggest that BTC’s price may be capped at around $90,000 in the near term. However, as the market continues to evolve, it remains to be seen how these factors will ultimately impact Bitcoin's price trajectory.