Bitcoin price eyes 'relief rally' to $61K after downside liquidation wipeout
2024-09-04

Bitcoin’s (BTC) price has witnessed a sharp correction at the start of each month in Q3 2024. The first seven days of July and August saw a drawdown of 12.56% and 15.94%, respectively. Cointelegraph
September is following a similar tone, but it is important to note that Bitcoin also recovered swiftly to form lower highs (LH) in the following weeks.
Bitcoin OI drops 12% in one week
Bitcoin open interest (OI) has dropped 12% from $34.7 billion to $30 billion over the past week, which is a net positive considering current market conditions. 
Rising OI when prices move sideways after a flash crash indicates that more short positions are being opened. Multiple days of negative funding rates after Aug. 5 confirmed the bearish bias. 
Hence, the drop in OI over the past week suggests that short-leverage traders could be nearing the exit until a clearer opportunity arises. Cointelegraph
Moreover, liquidations have also significantly decreased since the beginning of August. Bitcoin’s crash to $49,000 then liquidated $1 billion, after which liquidations have remained close to $150-$200 million or under. The exception is on Aug. 27 with $300+ million in liquidations, which was the second largest liquidation event in the month after Aug. 5.
Overall, decreasing liquidation means that price action is possibly forming a bottom, with leveraged positions exiting the market. 
Downside liquidation drop, opening possibility for $61K
Now, Bitcoin’s recent drop under $56,000 has reached several liquidation clusters, which were also tapped at the beginning of August. 
As observed in the liquidation heatmap, BTC’s latest drop cleared out a significant amount of liquidation leverage positions over $455 million. 
Liquidations and liquidation leverage are different in the sense that liquidations are permanent losses, while liquidation leverage represents the value of positions. For example, due to leveraged trading, $1 million in liquidations might represent $10 million in positional value.Cointelegraph
With downside liquidity currently dried up until $49,000, the next concentrated liquidation positions are around $61,000 i.e. worth over $500 billion. In other words, a rebound is becoming increasingly likely in the short term. 
CrediBull Crypto, an independent trader, expected a similar outcome after BTC took out recent liquidity wicks from Aug. 15. In an X post, the trader mentioned, 
Bitcoin price chart shows bullish divergence
From a technical perspective, Bitcoin’s price action did not exude strength after the correction. However, the conditions remained primed for a recovery as a couple of bullish signals were observed. Cointelegraph
Firstly, a liquidity sweep at $55,700 has been tested from Aug. 15. So, if the price fails to make an instant recovery, the nexy demand zone between $54,500 and $55,500 should be the next big support area. 
Secondly, a bullish divergence between the price and the Relative Strength Index (RSI) has been observed. While BTC has made lower lows, RSI is indicating lower highs, which means a reversal could be on the cards. 
Immediate overhead resistance remains at $59,914 and $61,144, which will be primary targets if BTC engages in a relief rally. 
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.