Bitcoin Drops 4% to $112,000 Amid Market Correction
Bitcoin recently fell 4% to $112,000 in a broad market correction, leading to the liquidation of $1.6 billion in long positions.
Market Overview
As Bitcoin bears intensified their sell-side activities into the beginning of the week, the cryptocurrency saw a decrease to $112,000, resulting in significant liquidations in leveraged positions across the crypto landscape. Analysts have noted signs of “cycle exhaustion,” suggesting that Bitcoin’s upward momentum may be coming to an end.
On Monday, Bitcoin (BTC) touched a low of $111,980, marking a 4% decline in the last 24 hours amidst a general market slump, according to TradingView. This drop extended the divergence from the all-time high of $124,500 reached on August 14, now down 10%. The downturn was accompanied by heavy liquidations within the derivatives market.
Over $1.62 billion worth of long positions were liquidated, with Ether (ETH) contributing $479.6 million and Bitcoin accounting for $277.5 million. In total, the market saw $1.7 billion eradicated from both short and long positions, as outlined in the figure below.
The abrupt market decline resulted in the liquidation of 402,730 traders, catching many by surprise as sentiment among investors shifted to a bearish outlook.
The Bitcoin liquidation heatmap indicated a price drop impacting liquidity near the $112,000 level, with over $400 million in bid orders resting between $111,500 and $110,000. This situation implies that Bitcoin’s price could potentially decline further to absorb this liquidity before any recovery can occur.
Catalysts for the Market Correction
Recently, the Federal Reserve’s interest rate cut, which was initially perceived as a significant bullish factor for BTC, failed to illustrate upward momentum, indicating that Bitcoin’s bull phase might be reaching its conclusion. Alphractal founder Joao Wedson commented, “Bitcoin is already showing signs of cycle exhaustion and very few are seeing it,” via a post on X.
Various on-chain indicators are now signaling that Bitcoin’s rally could be rapidly losing strength. The Spent Output Profit Ratio (SOPR)—which assesses the overall profitability of all spent Bitcoin transactions on the blockchain—has demonstrated decreased profitability, heightening the chances of a more substantial price correction.
Moreover, the Sharpe ratio has shown weakness compared to 2024, suggesting lower risk versus return and profit potential.
“This won’t attract as many institutions as most people believe,” Wedson added.
According to data from CryptoQuant, Bitcoin’s taker buy/sell ratio across all exchanges stood at -0.79. A metric below 1 indicates that bears dominate the market, while a value above 1 favors bulls. The current reading signifies that active selling volume (taker sell) is now greater than buying, reflecting a negative sentiment among traders.
Such low levels last occurred at the January 20 peak, when Bitcoin reached the $109,000 range, leading into a three-month period of correction that saw its price fall by 32% to $74,000 in April. The taker buy/sell ratio reinforces the notion that the market is navigating a critical area, with increasing selling pressure revealing vulnerabilities in Bitcoin’s price architecture.
As noted, analysts now have mixed views regarding the potential for a rally in October after the markets turned bearish on Monday.
This article does not provide investment recommendations. All trading and investment activities carry risks, and readers should perform their own due diligence before making decisions.
