Bitcoin fell to $112,000 over the weekend, but despite a volatile start to August, the correction could serve as a cornerstone for a strong recovery to come.
Bitcoin's "Power of 3" pattern aims to reach $126,000
Bitcoin's short-term price action demonstrates a market pattern called the "power of three," consisting of three phases: accumulation, manipulation, and distribution (AMD). This pattern reflects the direction of liquidity flows, which is often associated with the strategies of institutional investors, as opposed to the emotional reactions of individual investors.
Accumulation: The price has stabilized in the $119,500-$115,300 range, indicating a base-building phase.
– Manipulation: This was followed by a sharp decline, sending BTC to a bottom around $112,000 – which is considered the “shedding” phase, which aims to remove late-buying positions and trigger selling by retail investors.
Distribution: If Bitcoin can reclaim and maintain the $115,300 level on both the short and long-term timeframes, the market could enter a distribution phase, with a price target towards the $126,000 area – which coincides with recent technical resistance clusters.
Bitcoin 4-hour price chart | Source: TradingView
If this pattern is confirmed, it will not only signal a short-term recovery, but it may also represent a strong return to the uptrend, surprising marginal or bearish traders.
Bitcoin fills fair value gap, retests key support area
Bitcoin has effectively absorbed the wide-ranging fair value gap (FVG), located between $115,200 and $112,000. This area coincides with the previous all-time high set in May, which has now become a key support area for the market.
Bitcoin price chart one day | Source: TradingView
The rapid inflow of liquidity into this gap, accompanied by a recovery, reflects the underlying strength of the market. A retest of support around the previous high of $112,000, along with the absorption of the supply imbalance near $115,000, suggests that selling pressure may have exhausted itself, opening the door to a significant upside reversal.
$922M Liquidation Event Resets Market Trend
The cryptocurrency futures market has undergone a major reset, reflecting a significant shift in investor sentiment. In recent days, total open interest (OI) in Bitcoin has fallen from $88 billion to $79 billion, leading to a significant reduction in leveraged positions.
The correction coincided with a massive $922 million liquidation event in the cryptocurrency market on August 1st—the highest level since February 2025—with Bitcoin futures alone accounting for over $240 million.
Cryptocurrency Market Liquidation Chart | Source: CoinGlass
Removing such leverage has historically been a positive sign, as it helps eliminate excess risk and opens the way for new long positions.
Meanwhile, cryptocurrency analyst Amr Taha noted that funding rates on major exchanges like Binance, BitMEX, and Deribit have turned negative, a rare occurrence during periods of strong trends. Negative funding rates mean short positions must pay for long positions to maintain their positions, suggesting that retail investors are more likely to expect the market to continue falling.
Combined with the recent liquidations, this imbalance could be an indicator of potential upward momentum. With deteriorating market sentiment and funding pressures, conditions may be ripe for a strong rally.
Binance's net trading volume shows signs of capitulation
Data from CryptoQuant shows that the cumulative net bearer volume on Binance has fallen below -$1.5 billion—its lowest level since July 25. The metric measures net inflows from market orders, and a deep negative value reflects a clear dominance of active selling pressure.
Total Bitcoin Trading Volume on Binance | Source: CryptoQuant
This sharp decline is likely due to forced liquidation of long positions, particularly those opened during the price rebound above $114,000. Looking at the chart, losses are mainly concentrated in this price area.
Analyst Amr Taha said this is a familiar pattern, with individual investors tending to buy at the top and sell at the bottom, driven more by emotion than strategy. This panic selling may have signaled a local bottom, presenting an attractive accumulation opportunity for more discerning investors.
The $120,000 price tag could become a "price magnet."
Bitcoin's liquidation heat map shows a dense cluster of liquidations around the $120,000 level, which could be a price attraction if the rally continues and consolidates. Technical analyst Michael van de Poppe stated that Bitcoin is facing a major resistance area, and that breaking this level would be a "significant step" to pave the way to a new all-time high.
Bitcoin 4-Hour Chart Analysis | Source: Michael van de Poppe
Michael van de Poppe also noted that $114,800 and $116,800 are key levels to break. However, he warned that the risk of a temporary retest of the $110,000 support area in the short term remains. If these levels are successfully surpassed, Bitcoin could head towards $120,000 or higher in the coming weeks.
