Bitcoin is currently approaching a key liquidity zone near $86,500, where 77% of liquidation levels are long positions. This could potentially set the stage for a downside liquidity sweep as market makers exploit overcrowded positions before a possible reversal. Despite a bullish sentiment, there are signs of weakness underneath the surface, with retail long positioning relatively low and bid-ask ratios in the negative. Additionally, the flat Open Interest suggests a lack of fresh capital inflows to support the move. The liquidity cluster around $86,500 could act as a magnet, leading to forced liquidations and triggering a bear trap scenario.
Examining Bitcoin’s weekly structure, there are indications of a potential bottom formation as FUD sentiment eases and BTC consistently closes daily candles around $82,600. The Relative Strength Index (RSI) is below overheated levels, suggesting momentum still has room to expand without triggering immediate profit-taking. All exchanges recorded net outflows of 35,758 BTC on 11 April at $83,403 per BTC, indicating strategic accumulation. These signals point to a solid demand wall that may absorb sell-side pressure and cap downside risk. However, from a liquidity standpoint, a significant liquidity cluster above current price levels could create a high-risk setup for a downside liquidity sweep, potentially leading to a bearish leg.
The Net Unrealized Profit/Loss (NUPL) metric reveals the state of Bitcoin’s current price action, with a shift from the ‘Optimism’ phase to ‘Anxiety’ when approaching the $86,000-$87,000 zone. Each time Bitcoin reaches this zone, a growing number of market participants start feeling uneasy about their unrealized gains, leading to profit-taking or hedging. The NUPL shifting into the ‘Anxiety’ phase could signal a shift in market sentiment and potentially drive Bitcoin lower. With 77% of liquidations concentrated in long positions around the liquidity cluster near $86,500, a downside sweep triggering forced liquidations could lead to further volatility and potential bearish scenarios unless Bitcoin decisively breaks out of its current range-bound structure.
In the midst of market uncertainty, the risk of a bull trap looms as Bitcoin nears the key liquidity zone near $86,500. Signs of weakness in retail long positioning and lack of fresh capital inflows suggest a potential downside liquidity sweep could be on the horizon. Market makers may capitalize on overcrowded long positions, triggering forced liquidations and leading to increased volatility. The NUPL metric shifting into the ‘Anxiety’ phase when Bitcoin approaches the $86,000-$87,000 zone indicates market participants may start taking profits or hedging against unrealized gains, potentially driving prices lower. Overall, Bitcoin’s current liquidity setup and market sentiment point to the possibility of a bearish leg if the critical liquidity cluster is breached without a decisive breakout.
