Key Takeaways:
Bitcoin’s Power of 3 pattern shows accumulation, manipulation, and a possible distribution phase targeting $126,000.
A $922 million liquidation event caused a major reset in leveraged positions, increasing the chances of a market recovery.
Key levels around $115,300 and $116,800 must be cleared, with $120,000 acting as a strong price magnet.
Bitcoin (BTC) dipped to $112,00 over the weekend, but despite a shaky start to August, BTC’s recent correction might have laid the path for a swift recovery.
Bitcoin “Power of 3” pattern aims at $126,000
Bitcoin’s short-term price action is unfolding with a “Power of 3” market structure, consisting of Accumulation, Manipulation, and Distribution (AMD). This setup follows liquidity, reflecting how institutional investors operate compared to reactive retail flows.
Accumulation: Price stabilized between $119,500–$115,300, showing a base-building phase.
Manipulation: A sharp drop followed, bottoming out around $112,000, suggesting a shakeout to trap late longs and force retail capitulation.
Distribution: If BTC firmly reclaims $115,300 on both low and high time frames, the stage could be set for a distribution leg toward $126,000, a technical target aligning with recent resistance clusters.
This pattern, if validated, signals not just short-term recovery but potentially resumes the bull market and catches sidelined or short-biased traders off guard.
BTC absorbs fair value gap, retests key support
Bitcoin has effectively absorbed a key high time frame fair value gap (FVG) between $115,200 and $112,000. This range also coincides with the previous all-time high from May, which is now acting as a critical support zone.
The rapid liquidity sweep into this gap, followed by a price rebound, reflects strength beneath the surface. A support retest of a previous high at $112,000, combined with absorption of imbalanced supply near $115,000, suggests that sellers may be exhausted, increasing the chances of a bullish reversal.
$922 million liquidation event resets market bias
The crypto futures market reflects a significant reset, pointing to a potential shift in sentiment. Over the past few days, Bitcoin’s open interest dropped to $79 billion from $88 billion, signaling a sharp reduction in leveraged positions.
This came alongside $922 million in crypto position liquidations on Aug. 1, the highest since February 2025, with over $240 million tied to Bitcoin futures.
This type of leverage unwinding is historically bullish, as it reduces excess risk and creates room for new long positioning.
Meanwhile, crypto analyst Amr Taha notes that funding rates across major platforms like Binance, BitMEX, and Deribit have turned negative, an uncommon occurrence during strong trend phases. Negative funding implies that shorts pay longs to keep positions open, indicating that retail traders are heavily biased toward further downsides.
When paired with recent liquidations, this imbalance hints at potential contrarian strength. As sentiment skews bearish and funding compresses, conditions could favor a rebound.
Binance net taker volume signals capitulation
Data from CryptoQuant indicates that Binance’s cumulative net taker volume dropped below -$1.5 billion, a level last seen on July 25. This metric measures the net flow of market orders, with strong negative readings indicating aggressive sell-side pressure.
This sharp drop likely reflects the forced liquidation of late long positions, particularly those entered during the rebound above $114,000. The chart above shows concentrated losses in this zone.
Related: $110K support key as Bitcoin enters bear month with a 5% dip: Analyst
Amr Taha says this aligns with a familiar pattern where retail investors tend to buy tops and sell bottoms, driven more by emotion than strategy. This panic-driven sell-off could mark a local bottom, offering more calculated traders a potential accumulation opportunity.
$120,000 should act as a price magnet
Bitcoin’s liquidation heatmap shows a dense cluster around $120,000, acting as a magnet if upward momentum builds. Technical analyst Michaël van de Poppe says BTC is at a crucial resistance zone, noting that breaking above it is “a good first step” toward a new all-time high.
He highlights that $114,800 and $116,800 are key levels to flip, while cautioning that a brief retest of $110,000 is still possible. If these hurdles are cleared, a move toward $120,000 and above could materialize in the coming weeks.
Related: Is BTC repeating path to $75K? 5 things to know in Bitcoin this week
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.