Key Takeaways
Why is Bitcoin falling?
Bitcoin fell from its ATH of $126K after a spike in short interest rates.
Can the BTC Price Turn Around?
The formation of liquidity zones above the price and ETF inflows indicate a potential reversal.
Bitcoin [BTC] briefly fell below $120,000 after traders took profits and increased their short positions. However, it quickly recovered above that key level.
Meanwhile, the rise in short-term interest rates coincided with a shift in the risk appetite index into negative territory, signaling increasing caution in the market.
Build Bitcoin short interest!
The BTC Futures market saw a surge in activity driven by increased volatility, with an added $939 million, indicating aggressive speculative betting ahead of the weekend.
Despite this increase, the Cumulative Volume Delta (CVD) fell by $801 million, indicating that sellers remain dominant and rising short positions are driving the current price action.
Source: Maartunn/X
The futures order book was well supported with a bid between $119,680 and $120,571. Yet the company was under constant selling pressure to break through the previously formed buying walls.
The trend revealed a weak futures-based structure, with the market divided between opportunistic bulls and defensive bears. The next breakout region was a major turning point in Bitcoin’s future path.
The risk appetite index is shifting
The Risk Appetite Index also turned negative. This marked a clear shift towards a risk-free environment in which investors opted for safer investments.
The weaknesses of the fixed income and equity risk elements, which represented a broader caution in the markets, could strongly influence this change.
Source: Alpha extract
Despite the index’s short-term volatility, analysts saw the recent decline as a shakeup and not a structural decline.
They emphasized the importance of risk management at this stage, even when considering the long-term perspective. Healthy global liquidity and the institutional presence in the major financial markets provided favorable support for risky investments.
Why might things change?
Signs of a possible reversal emerged as buy orders began piling up above Bitcoin’s current price level on the liquidity chart.
Two major zones were identified: one around $120,500 and another large cluster between $123,000 and $126,000.
A smaller liquidity pocket of almost $121,500 also formed. These areas contain large sell orders, indicating that Bitcoin could move upward to trigger or ‘sweep’ them, making an upward move towards these targets increasingly likely.
Source: CoinGlass
Bitcoin ETFs saw strong and steady inflows in October.
The highest daily net inflow occurred on October 6, reaching $1.21 billion. Other notable inflows include $985.08 million on October 3 and $875.61 million on October 7, reflecting continued investor interest.
Cumulative total net inflows increased by $5 billion between October 1 and 9. So it showed tremendous capital growth within a very short period of time.