Key takeaways:
- Bitcoin targets $122,000, where $2 billion in short liquidations are clustered but Q3 seasonal data hints at downside.
- A falling RSI, spot BTC ETF outflows, and low trading volumes point to weakening bullish momentum.
- FOMC minutes and positive news from the White House could trigger a rally on Wednesday.
Bitcoin (BTC) briefly dipped below $117,000 on Tuesday, sweeping the internal liquidity built between $117,000 and $119,000 over the weekend. This liquidity absorption, often a precursor to directional moves, occurred as $100 million in long positions were liquidated. Despite the dip, the 100-day exponential moving average (EMA) on the four-hour chart continues to offer dynamic support, limiting downside risk in the short term.
Bitcoin four-hour chart. Source: Cointelegraph/TradingView
With minimal buy-side liquidity visible until $114,500, the path of least resistance now remains higher. The next key area of interest lies between $120,000–$122,000, an area of sell-side liquidity where stop orders are clustered. A daily supply zone between $121,400 and $123,200, representing previous price resistance, adds to this confluence, suggesting BTC may attempt to sweep the external liquidity established over the past two weeks.
Reinforcing this bias, BTC liquidation map data reveals that $2 billion in BTC short positions could be liquidated around $121,600.
Binance BTC/USDT Liquidation map. Source: CoinGlass
Can Bitcoin overcome $122,000?
While short-term market structure outlines a bullish recovery, the long-term setup indicates that BTC’s bullish momentum could be fading. A double top formation could emerge near its all-time high, reflecting buyer fatigue. Failure to break cleanly above the $123,200 daily supply zone would validate this bearish pattern, stalling price discovery.
Bitcoin 12-hour chart. Source: Cointelegraph/TradingView
Onchain data supports this caution. Bitcoin's daily relative strength index dropped sharply to 51.7 from 74.4, indicating exhaustion on the spot market, while daily volumes fell to $8.6 billion, both signs of fading participation. Spot BTC exchange-traded fund (ETF) flows also declined 80% week-over-week to $496 million from $2.5 billion, pointing to cooling institutional appetite.
While futures open interest remains elevated at $45.6 billion, rising long-side funding suggests growing overconfidence. Additionally, 96.9% of supply remains in profit, signaling high potential for profit-taking.
Spot BTC ETF Netflow (weekly). Source: Glassnode
August historical returns further reinforce this stance. With over 60% of the August period closing in the red with an average return of 2.56%, the upcoming month presents seasonal headwinds. Combined with weakening onchain activity, such as falling active addresses and transfer volumes, BTC may retrace in the coming weeks.
BTC historical average returns per month. Source: Axel Adler Jr.
However, this outlook could be invalidated on Wednesday. The US White House is expected to release a strategic crypto policy report, which may introduce a Bitcoin Reserve Framework and delta-neutral accumulation strategies, potentially boosting spot ETF flows and BTC treasury building.
Additionally, all eyes remain on this week’s Federal Open Market Committee (FOMC) meeting. While no rate cut is expected, such an outcome could be largely priced in, given July’s consistent neutral tone. Yet, any dovish commentary from Fed Chair Jerome Powell could shift sentiment. If Powell hints at a potential rate cut in September, markets may front-run the expectation, driving BTC to break above $123,000 and push to new highs.
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.
