Bitcoin experienced a significant 4% drop, plummeting to a low of $112,000, a decline attributed to a broader market correction. This shift resulted in the liquidation of approximately $1.6 billion in long positions across various cryptocurrencies, highlighting a shift in investor sentiment as bearish activity increased.
The price drop extended the divergence from Bitcoin’s all-time high of $124,500, reached on August 14, by 10%. Analysts pointed to signs of “cycle exhaustion” for Bitcoin, suggesting that its recent bull market could be coming to an end. The market faced a major liquidation event as over $1.62 billion in long positions were wiped out, with Ethereum (ETH) seeing $479.6 million in liquidations and Bitcoin contributing $277.5 million to the total losses. In total, the cryptocurrency market lost around $1.7 billion in both short and long positions, affecting more than 402,730 traders.
The abrupt market decline presented a liquidity challenge around the $112,000 mark, where over $400 million in bid orders were positioned between $111,500 and $110,000. This liquidity situation suggests that Bitcoin’s price may drop further to clear these orders before any potential rebound occurs.
Recent actions by the Federal Reserve, including an interest rate cut, which many initially regarded as a bullish factor for Bitcoin, failed to sustain market momentum. Analysts are expressing concerns that the Bitcoin bull run may have reached its peak. Joao Wedson, the founder of Alphractal, commented on social media regarding the exhaustion signals present in the market, indicating that few are recognizing the potential for a deeper correction.
Important on-chain metrics are also raising alarms. Bitcoin’s Spent Output Profit Ratio (SOPR) is showing signs of diminishing profitability, which raises the likelihood of further price declines. The Sharpe ratio, a measure of risk-adjusted returns, has also weakened compared to 2024, suggesting lowered profit potentials, which could deter institutional investors.
The taker buy/sell ratio, an indicator of market sentiment, recently dipped to -0.79, confirming that selling pressure is outpacing buying volume. Historically, similar readings have preceded significant downturns, as seen earlier this year when Bitcoin’s price fell from around $109,000 to $74,000 over a three-month period.
Market analysts are divided on the prospects for an October rally following Monday’s bearish turn, marking a significant moment in Bitcoin’s price landscape. As the market grapples with uncertainty, traders are reminded that every investment and trading decision carries inherent risks, urging them to conduct thorough research before acting.
