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Bitcoin has experienced significant downward price movement, leading to liquidations exceeding $78 million over the past 24 hours. This sharp correction has been a recurring trend at the start of each month in the third quarter of 2024. Both July and August saw notable declines of 12.56% and 15.94%, respectively, within the first seven days. September has shown a similar pattern, though Bitcoin has historically rebounded to form lower highs in subsequent weeks.
The open interest (OI) in {Bitcoin} (BTC) has decreased by 12% from $34.7 billion to $30 billion over the past week. This reduction is seen as a positive development under current market conditions. Rising OI during periods of sideways price movement following sharp declines often indicates the accumulation of short positions. The occurrence of multiple days of negative funding rates since August 5 has reinforced a bearish sentiment. Consequently, the recent drop in OI suggests that short-leverage traders may be exiting their positions until more favorable conditions arise.
Since early August, liquidations have also diminished significantly. The sharp decline to $49,000 in August triggered $1 billion in liquidations, but subsequent figures have stabilized around $150-$200 million, with the exception of August 27, which saw over $300 million in liquidations. This decrease in liquidations might signal the formation of a market bottom, with leveraged positions being reduced.
The recent drop in Bitcoin’s price below $56,000 has intersected several liquidation clusters, similar to those seen in early August. The latest drop has cleared substantial amounts of leveraged positions, totaling over $455 million. With downside liquidity now reduced until $49,000, the next concentration of liquidation positions is around $61,000, representing a significant value. This scenario suggests an increasing likelihood of a rebound in the short term.
Technically, Bitcoin’s price action has shown some signs of strength despite recent corrections. A bullish divergence between the price and the Relative Strength Index (RSI) has been noted, indicating a possible reversal. Key resistance levels are identified at $59,914 and $61,144, which could become focal points if Bitcoin experiences a relief rally.
