Bitcoin [BTC] has managed to break the $90k round-number resistance after three weeks of sideways price action between the $85k – $90k region.
Declining whale balances was a warning sign that the rally might face setbacks and delays.
In a post on X, crypto analyst CrypNuevo highlighted another reason why Bitcoin’s expected price bounce might see a liquidity run before the true impulse move.
Analyzing the expected Bitcoin liquidity run
A liquidity run is an initial false price move that is designed to trap breakout traders, explained the analyst. In this scenario, a breakout past the $94.5k local resistance would persuade bulls that the breakout was underway.
The new long positions’ liquidation levels can then be hunted with a sweep of the lows below $84k. Thereafter, the true impulse move to $100k and beyond can commence.
At the same time, the analyst warned that it is possible that the resistance at the $92k from the 50-day EMA could reject Bitcoin.
In this scenario, the liquidity run to $96k might not happen, and instead BTC might directly head toward $80.6k in the coming days.
AMBCrypto had noted recently that a move toward $94k-$96k was likely this month but also warned of bearish ETF flows in the second half of December that gave traders a dilemma.
The similarities with Ethereum
Interestingly, Ethereum [ETH] could also see a similar outcome on the price charts. While the leading altcoin tends to follow Bitcoin, the liquidation heatmap outlined what swing traders can expect in January.
Ethereum has also collected the liquidity at $3,200 and has another strong magnetic zone at $3,500. It also has an attractive liquidity cluster at $2,700-$2,800.
A sweep of these lows could serve as a launchpad for the next ETH rally.
This meant that Bitcoin and Ethereum traders not already in long positions should be patient. Those in short-term profits could use a lower timeframe momentum shift to take profits.
A BTC breakout past the $94.5k is not an automatic signal to go long, and traders should beware of the possibility of a liquidity run.
Final Thoughts
- A sweep of the $96k level and a subsequent reversal below $94k could be a warning sign that Bitcoin could drop to $84k and $80.6k.
- Ethereum liquidation levels also showed similarities to Bitcoin’s, and a price drop to $2,800 was a possibility.
