Important takeouts:
Bitcoin is targeting $122,000, with a cluster of short liquidations of $2 billion, but third quarter data suggests a downside.
The falling RSI, spot BTC ETF spills and low trading volumes indicate weakening bullish momentum.
FOMC minutes and positive news from the White House could trigger a rally on Wednesday.
Bitcoin (BTC) briefly fell below $117,000 on Tuesday, wiping out internal liquidity built between $117,000 and $119,000 over the weekend. This liquidity absorption, which often precursors of directional movement, occurred because of the long $100 million settled. Despite DIP, the 100-day exponential moving average (EMA) on the 4-hour chart continues to provide dynamic support and limits downside risk in the short term.
The minimum buy-side liquidity is visible until $114,500, which means the path of minimal resistance is high. The next important area of interest lies between $120,000 and $122,000, the liquidity area on the seller side where stop orders are clustered. A daily supply zone of $121,400 to $123,200 representing previous price resistance was added to this confluence, suggesting that BTC could attempt to sweep the external liquidity established over the past two weeks.
BTC liquidation map data, which strengthens this bias, reveals that $2 billion in BTC short positions can liquidate approximately $121,600.
Related: Bitcoin prices have increased by 50%.
Can Bitcoin overcome $122,000?
The short-term market structure outlines a bullish recovery, but the long-term setup shows that BTC’s bullish momentum may be declining. The formation of a double top can appear near its all-time high, reflecting buyer fatigue. If it doesn’t break cleanly beyond the $123,200 supply zone every day, this bearish pattern is verified and price discoveries stall.
On-chain data supports this attention. Bitcoin’s daily relative strength index has dropped sharply from 74.4 to 51.7, indicating spot market fatigue, but daily volume has dropped to $8.6 billion, both of which are signs of fading participation. Spot BTC Exchange-Traded Fund (ETF) Flows has cooled its institutional appetite, with 80% per week falling from $2.5 billion to $496 million.
Open interest on futures remains rising at $45.6 billion, but long-term capital gains suggest a rise in overconfidence. Furthermore, 96.9% of the supply remains profitable, indicating a high probability of profit.
The history of August further strengthens this stance. Over 60% of the August period closed in red, with an average return rate of 2.56%, indicating seasonal headwinds next month. BTC, combined with weakening of Onchain activities such as falling active addresses and transfer volumes, could potentially retrace in the coming weeks.
However, the outlook could be void on Wednesday. The US White House plans to release a strategic crypto policy report that could introduce a Bitcoin Reserve Framework and a delta-neutral accumulation strategy.
Plus, all eyes remain at this week’s Federal Open Market Committee (FOMC) meeting. Rate reductions are not expected, but given the consistent neutral tone of July, such results could be largely priced. But the incredible commentary from Federal Reserve Chair Jerome Powell could change feelings. If Powell suggests a potential rate cut in September, the market will push expectations to the forefront, pushing BTC above $123,000 to a new high.
Related: Bitcoin analysts say this must happen for BTC prices to reach new highs
This article does not include investment advice or recommendations. All investment and trading movements include risk and readers must do their own research when making decisions.
