FameEX Hot Topics | Bitcoin Liquidity Zones Swept, While Uptick in Open Interest Hints at Market Recovery

Bitcoin’s sudden sell-off from its $124,474 all-time high took many traders by surprise, triggering a wave of long liquidations across the market. At first glance, the correction appeared routine, as profit-taking at new highs is common, and some traders tend to open shorts simultaneously. However, the magnitude of the decline — a 6.72% drop below $115,000 — was sharper than expected, sparking speculation that Bitcoin could fall further, possibly to $110,000 or lower.

Bitwise European Head of Research, Andre Dragosch, addressed the situation by noting that profit-taking, especially from short-term holders, has indeed increased but has also gradually diminished in size over time. This suggests that while some selling pressure remains, it has become less intense compared to earlier phases of the bull cycle. Still, the depth of this correction exceeded most forecasts, intensifying bearish sentiment among certain analysts.

Hyblock co-founder and CEO Shubh Varma added context by explaining how liquidity dynamics have shaped Bitcoin’s weekend price action. He observed that liquidity pools built up on the downside ahead of the weekend created obvious targets for liquidation. Once weekend trading began, these pools were “swept,” a recurring theme in thin weekend markets where liquidity grabs often occur. According to Varma, this thin orderflow exposed vulnerabilities in Bitcoin’s structure, leaving it prone to sharper swings.

Varma also highlighted the influence of broader crypto market activity on supply and demand. He pointed out that large Ethereum unstaking events recently added supply to the market. At the same time, however, digital asset treasuries (DATs) and institutions stepped in with strong buying activity during weekdays, purchasing both Bitcoin and Ethereum. Their demand not only absorbed the increased supply but far exceeded it, fueling price moves higher. The challenge arises during weekends, when Wall Street closes and institutional demand dries up, creating imbalances in orderbooks and slippage metrics that amplify volatility.

Despite Monday’s sharp drop below $115,000, Varma expressed confidence in Bitcoin’s resilience. He explained that large amounts of open interest emerged precisely where liquidity was swept, forming a potential support zone. Since both longs and shorts were opened at those levels, with shorts now trapped, this positioning could provide stability and even support a recovery in the near term.

Disclaimer: The information provided in this section is for reference only and does not represent any investment advice or the official views of FameEX.