The price of Bitcoin has experienced recent dips that are being taken advantage of by buyers, in a phenomenon known as “buying the dip.” However, despite the optimism of some investors, technical analysis of the price charts suggests that the cryptocurrency could face a massive sell-off that would take it to around $106,000. This situation occurs in a context of high volatility and after one of the largest single-day long position liquidations of the year in the cryptocurrency market.
Although data indicates that Bitcoin is trading at a discount, perpetual and spot futures volumes lack the strength to sustain a trend reversal. Sellers continue to take advantage of price rebounds to sell, which increases the downward pressure. Analysts warn that the Bitcoin bull market could be entering its “late-cycle phase,” which increases the risk of a deeper correction.
Sellers continue to dominate price action, and liquidation heat maps show that the price is consuming the underlying buy liquidity. The lack of aggressive buying volume in the spot markets and the use of long leverage in the perpetual futures market increase the odds that sellers will try to push the price to lower levels, looking to liquidate leveraged long positions. This lack of volume is a red flag for the bulls.
The Risk of a Deeper Correction
Despite the buying appetite in the current range, the bulls are not out of the woods. Liquidation heat maps show a significant cluster of liquidity around $107,000, suggesting that a drop to that level is a real possibility. Price action has been largely driven by the perpetual futures market, and the lack of sustained buying volume in the spot markets increases the risk of a massive sell-off.
In conclusion, although the dips in Bitcoin have attracted buyers, the market is at a crossroads. The lack of sustained buying volume and the dominance of sellers in the perpetual futures market suggest that the risk of a deeper correction persists. Investors will need to be attentive to liquidation levels and the evolution of volume in the coming days to determine if the bulls can regain control or if, on the contrary, we will see Bitcoin approach the $106,000 mark.
