Executive Summary
The Story So Far
Why This Matters
Who Thinks What?
Bitcoin experienced a notable dip below $111,500 during Monday’s Asian market session, leading to the liquidation of approximately $280 million in leveraged long positions. This movement cleared internal liquidity and is now testing a crucial daily demand zone between $110,700 and $113,200, placing the cryptocurrency at a critical juncture where key support levels will determine its immediate trajectory. The market now faces the prospect of either a rebound or a deeper price breakdown.
The recent price action saw Bitcoin clear liquidity between $115,000 and $114,000. This dip puts BTC at risk of losing support from its 50-day exponential moving average if the daily candle closes under $113,200. This retest was anticipated, with Cointelegraph having projected a dip under $113,000 last week before a potential upside.
A brief bullish reaction followed the Federal Reserve’s interest rate cut last Wednesday, pushing BTC to $117,500. However, this rally failed to establish a sustained bullish structure, subsequently leading to the current correction. Despite this downside, the overall market structure largely remains constructive.
Market Structure and Demand
Data from CryptoQuant suggests that investors are actively buying into the current dip. A strongly positive Coinbase Premium Index indicates robust US spot demand, acting as a buffer against more significant downside pressure. On-chain analysis by Bitcoin researcher Axel Adler Jr. further supports this, noting consistent spot demand over the past month, totaling 95,800 BTC.
This sustained accumulation is helping to keep price action near the upper boundary of its recent range. This occurs even as futures markets exhibit signs of short-term weakness. The liquidation of nearly $280 million in BTC futures positions effectively flushed out excessive leverage.
This leverage had accumulated during Bitcoin’s climb from $107,000 to $117,500 in September. With this reset, the market could be poised for a healthier continuation, provided that spot demand remains strong.
Critical Price Levels to Watch
Bitcoin is currently trading just under $113,000, with three distinct price levels emerging as crucial for its short-term trend.
The $110,700 to $113,200 Demand Zone
The first critical area is the demand zone ranging from $110,700 to $113,200. A strong rebound from this level would confirm that the recent price drop was primarily a leverage flush, clearing out speculative positions. Crypto analyst Dom highlighted that futures markets experienced one of the largest long liquidations in recent months, with approximately 80% concentrated on Bybit. Such events frequently reset market conditions, potentially paving the way for a cleaner upward movement, possibly pushing BTC back above $117,000 in the short term.
The $107,200 Support Level
If Bitcoin’s recovery from the current demand zone is slow, it may drift towards external liquidity or support around $107,200. Historically, BTC has often moved between higher time frame range highs and lows before resuming broader trends. More than $3 billion in long positions remain exposed at this level, suggesting the possibility of a deep liquidity grab before a bullish reversal. September’s historically bearish seasonality makes this short-term shakeout plausible before stronger upside momentum potentially develops into Q4.
Risk of Breakdown Below $107,200
The most bearish scenario involves a prolonged breakdown below $107,200, which could extend towards $100,000. This would signify a structural shift towards bearish market conditions. Consolidation at these lower levels would indicate an exhaustion of the current market cycle. Glassnode data supports this risk, highlighting that the short-term holder cost basis sits near $111,400. Sustained trading below this “battle line” between bulls and bears could solidify a transition to a mid- to long-term bearish structure.
Outlook
Bitcoin stands at a pivotal moment, with recent liquidations potentially clearing the path for a healthier market. However, its ability to hold key support levels will be paramount. The interplay between strong spot demand and the pressure on critical price zones will dictate whether the cryptocurrency stages a recovery or faces a deeper correction in the near term.
