#BTC

Bitcoin: "swept liquidity zones", but the increase in open interest suggests a BTC recovery

The sharp drop in Bitcoin caught many traders by surprise, intensifying the liquidation rate of long positions, but several data points show that bulls are stepping in to buy the dip.

The abrupt drop in Bitcoin

BTC

from its all-time high of $124,474 seemed like a routine outcome at first, especially considering that a portion of traders will always take profits at new highs, and a separate group will choose to open short positions at the same time.

Addressing the recent drop, Bitwise's European research director, Andre Dragosch, published the chart above and said:

“NOTE: Yes, we have seen an increase in profit-taking (by short-term holders) lately. But they have also become smaller over time.”

That said, the correction of 6.72% below $115,000 is perhaps a bit deeper than most anticipated, leading some analysts to predict a new drop to $110,000 or lower.

In statements to Cointelegraph, Hyblock co-founder and CEO, Shubh Varma, explained that:

“During the last week, we have seen a clear pattern in the liquidity dynamics driving Bitcoin's price action over the weekend. As we entered the weekend, liquidity built up to the downside, creating visible pools of potential liquidation targets. As the weekend came to an end, that liquidity was swept away, reinforcing the recurring theme that thin weekend markets are more vulnerable to 'liquidity grabs'.”