- $511M long liquidations sparked Bitcoin’s short-term corrective decline.
- Support level of 120,000 is essential in case of a possible bullish reversal.
- Market sentiment remains optimistic despite short-term technical weakness.
Bitcoin price slipped on Wednesday, falling below the $122,000 mark after a wave of liquidations erased over $511 million in leveraged long positions. The fall came after a succession of record highs, indicating that traders are cashing in on their gains as volatility increases.
BTC price fell 1.8% to $122,475, compared to its weekly performance of about 6%. The overall cryptocurrency market declined by 2.17% over 24 hours, reducing the total market capitalization to $4.42 trillion. Ether fell 4.8% to $4,485, and traders took profits on the broad majority of significant assets.
Leveraged Long Squeeze and Profit-Taking Pressure
The drop followed the sale of an astonishing 662 million crypto positions, and about 70% were longs. This forced selling was after the third record high of Bitcoin was achieved at $126,500 during the course of the week. The increased trading on leveraged positions plunged several over-exposed persons, further increasing volatility rates as open interest in derivatives has reached up to $1.09 trillion.
The parabolic gains have ended after a week of heavy profit-taking and technical resistance at $126,500, resulting in downward momentum. In the meantime, a potential U.S. government shutdown and a strengthening dollar also put a strain on the risk assets, cryptocurrencies included.
Sentiment in the entire market is positive, in spite of the pullback. The Fear and Greed Index is at 60, indicating that the investors remained confident. Exchange balances are the lowest since 2019, which is an indication of a smaller amount of coins to be sold.
The move towards Bitcoin retracement seems to be a cooling-down process instead of an overhaul. The traders are currently observing the ability of BTC to stabilize above the critical level, which is $120,000. The belief that the zone will support the Uptober rally, and the degree of downfall would open up the door to $117,000. Institutional inflows into Bitcoin ETFs remain a key driver of long-term bullish sentiment.
Will Bitcoin Price Hold $120k Support Level?
An analyst posted on X that Bitcoin was receiving a stiff rejection after attempting to test the $125,000 resistance level on Tuesday. After this rebound, the cryptocurrency has been drawing nearer to the support region of $120,000, which now significantly contributes to the further course of the cryptocurrency.
Based on the market trends, the current market may indicate a possible reversal once holding of the position of $120,000 level is reached, and a fresh bullish momentum will take off. Nonetheless, in case Bitcoin does not uphold this main support, the next important area is between $117,000 and $118,000.
The four-hour chart shows the presence of a narrow trading range of $120,000-$125,000 with both levels serving as significant support and resistance areas.
The Moving Average Convergence Divergence (MACD) indicator is currently in a bearish crossover, but the histogram is already giving out signs of weakening bearish momentum. This may show a possible change in market sentiment should a rise in buying pressure occur at the present levels.
In the meantime, the Relative Strength Index (RSI) is around 53, which indicates that there is no buying or selling power among buyers and sellers. Nevertheless, the RSI has just hit its bottom, implying that even a temporary recovery might be appearing.
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