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Bitcoin (BTC) remained close to two-month lows at the Wall Street opening on August 18 as markets adjusted to significant liquidations.
"Drying liquidity" impacts BTC price crucial support
Data from Cointelegraph Markets Pro and TradingView indicated that BTC price movement was largely sideways following a single daily candle that resulted in an 8% decline.
The leading cryptocurrency experienced a wave of liquidations across derivatives markets, which constituted a substantial majority amid relatively low spot selling.
“In Deribit, it seems likely that a significant account was liquidated, given the massive short liquidations that occurred simultaneously,” trading firm QCP Capital noted in a market update shared with Telegram channel subscribers on that day.
Bitcoin liquidations composite chart. Source: QCP Capital
QCP, along with others, observed that the market’s response to the purported catalyst — a write-down of SpaceX’s $373 million BTC holdings — seemed overstated.
“This has revived the memories of 2021 and 2022 associated with Elon-driven market peaks and troughs, and we certainly hope the market will not regress to those periods again,” it added, referencing prior Bitcoin sales and remarks from Elon Musk, co-CEO of SpaceX and Tesla.
Total liquidations rivaled those witnessed in the immediate aftermath of the FTX exchange collapse — an event that led to BTC/USD falling to two-year lows of $15,600 in November 2022.
“This appears to be yet another indication of the diminishing liquidity that markets have experienced over the past few weeks,” financial commentary outlet The Kobeissi Letter remarked in part of its own response.
Analyst: Spot sell volume still 50% below 2023 peak
As BTC price gradually approached $26,000, market participants expressed differing views on the true nature of the situation and its potential future effects.
Related: How low can the Bitcoin price go?
For well-known trader and analyst Rekt Capital, the outlook was grim — a double top pattern for BTC/USD in 2023, coupled with a complete absence of support from trend lines and moving averages during the downturn.
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“BTC established its Higher High at approximately $31,000 on increasing volume. However, the price formed the second half of its Double Top on decreasing volume,” he stated in part of several X posts.
An accompanying chart illustrated trading volume on daily timeframes, as Rekt Capital cautioned that capitulation had likely not yet reached levels seen in previous sell-offs.
“While there was a slight increase in seller volume during this crash… It is still far from the Seller Exhaustion volume levels (green box) of earlier BTC reversals (yellow circles),” he clarified.
“In fact, current Seller Volume would likely need to double to achieve those Seller Exhaustion volume levels that triggered price reversals in early and late March as well as mid-June.”
BTC/USD annotated chart. Source: Rekt Capital/X
Others held a more positive view, including trader CryptoCon, who identified two key tasks completed that are typical of successful BTC price recoveries during bull market corrections.
These tasks involved relative strength index (RSI) values rebounding at the 0.382 Fibonacci retracement level.
“Every cycle, the Weekly Bitcoin RSI experiences a false breakout from the bull market starting point, some lasting longer than others,” he explained.
“And each of these instances revisits the .382 Fibonacci retrace of the move. With the latest decline, both of those conditions are now fulfilled.”
BTC/USD annotated chart with weekly RSI. Source: CryptoCon/X
Rekt Capital pointed out that the daily RSI was currently at its most “oversold” level since June 2022, with only two occurrences in Bitcoin’s history, both during bear markets, surpassing it.
Looking forward, QCP highlighted the upcoming commentary from Jerome Powell, Chair of the United States Federal Reserve, as a potential source of volatility next week.
“We believe that much now hinges on Powell’s speech at Jackson Hole next week,” it concluded.
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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.
