The relationship between price and liquidity
During the decline in the trade war, it was indeed after the long liquidity was completely cleared that the bottom was reached...
This is not to say that the manipulators did it intentionally, but liquidity itself is a price magnet;
From this perspective, the price is not intentionally looking to liquidate a position, but rather when a position experiences a large amount of futures liquidity, it will spontaneously attract the price;
Imagine you opened a position in the wrong direction, and then as the price moves in the opposite direction, if people who made the same wrong directional bet start to get liquidated in a specific range, then as the price gets closer to that liquidation price, there will always be someone unable to resist closing their position early...
The act of closing positions brings more momentum for the price to move forward, leading to more people closing positions to stop losses, forming a cycle, until the price enters the area where everyone has to close their positions, which is the forced liquidation area, and the positions that are wrong directionally have all closed, and those that needed to be liquidated have been...
Thus, the price loses its previous momentum and naturally reaches a bottom or a top...
So, in conclusion, it is not the price that is searching for a liquidation area to settle, but rather the liquidation area itself that is attracting the price!
In this process, the buying and selling behavior in the spot market acts as a trigger, while the actions in the futures market are a passively triggered chain reaction;
Can we conclude that in a market like Bitcoin, most of the time, the participants in the game are futures, which will accumulate liquidity in the price fluctuation range, preparing for the next trend;
However, during this process, the price will not show a clear direction until the spot market finally presents strong supply or demand, forcibly changing the balance of the futures market, leading to a chain reaction, and the price begins to break out, thus initiating a trend until the liquidity in that direction is completely liquidated
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