Key Takeaways
Why is Bitcoin dropping?
Bitcoin dropped from its ATH of $126K after a spike in short interests.
Can BTC price turn around?
The formation of liquidity zones above the price and ETF inflows signal a potential reversal.
Bitcoin [BTC] briefly dropped below $120K after traders took profits and increased short positions. However, it quickly rebounded above that key level.
Meanwhile, the rise in short interest coincided with a shift in the risk appetite index to negative territory, signaling growing caution in the market.
Bitcoin short interest building!
The BTC Futures market saw a surge in activity driven by heightened volatility, with $939 million added, signaling aggressive speculative bets ahead of the weekend.
Despite this increase, the Cumulative Volume Delta (CVD) dropped by $801 million, indicating that sellers remain dominant and rising short positions are shaping current price action.
Source: Maartunn/X
The futures order book was well-supported on a bid in the range of $119,680 to $120,571. Still, it was under continuous selling pressure to break down the previously formed buy walls.
The trend highlighted a weak Futures-based structure, with the market divided among opportunity bulls and defensive bears. The next breakout region was a key turning point on the future path of Bitcoin.
Risk appetite index shifts
The Risk Appetite Index also became negative. This marked a clear shift to a risk-off environment in which investors opted for safer investments.
The weaknesses of fixed income and equity risk elements, which represented broader caution on markets, could greatly influence this change.
Source: Alpha Extract
Despite the short-term volatility of the index, analysts saw the recent decline as a shakeout and not a structural decline.
They emphasized the importance of risk management at this stage, even considering the long-term perspective. Sound global liquidity and institutional presence in major financial markets supported risk assets favorably.
Why could things turn?
Signs of a potential reversal emerged as buy orders began accumulating above Bitcoin’s current price level on the liquidity map.
Two key zones were identified: one around $120,500 and another major cluster between $123,000 and $126,000.
A smaller liquidity pocket also formed near $121,500. These areas contain large sell orders, suggesting that Bitcoin could move upward to trigger or “sweep” them, making an upside move toward these targets increasingly likely.
Source: CoinGlass
Bitcoin ETFs saw strong and steady inflows throughout October.
The highest daily net inflow occurred on the 6th of October 6, reaching $1.21 billion. Other notable inflows included $985.08 million on the 3rd of October and $875.61 million on the 7th of October, reflecting sustained investor interest.
The cumulative total net inflow increased between October 1 and 9 by $5B. Thus, it showed tremendous capital growth within a very short time.