Bitcoin Bulls Target $122K Amid $2B Short Liquidations, But Q3 Seasonality May Stall Breakouts

Bitcoin briefly dipped below $117,000 on Tuesday, sweeping internal liquidity between $117,000 and $119,000 accumulated over the weekend. This liquidity absorption, often a precursor to directional moves, coincided with the liquidation of $100 million in long positions. Despite the dip, the 100-day exponential moving average (EMA) on the four-hour chart continues to provide dynamic support, limiting short-term downside risk. With minimal buy-side liquidity visible until $114,500, the path of least resistance now points upward. The next key area of interest lies between $120,000 and $122,000, where sell-side liquidity clusters as stop orders accumulate. A daily supply zone between $121,400 and $123,200, representing previous price resistance, adds to this confluence, suggesting Bitcoin may attempt to sweep the external liquidity established over the past two weeks. Supporting this bullish bias, Bitcoin liquidation data reveals that approximately $2 billion in BTC short positions could be liquidated around the $121,600 price level.

Can Bitcoin Overcome $122,000?

While the short-term market structure outlines a bullish recovery, the longer-term setup indicates that Bitcoin’s momentum could be fading. A potential double top formation near its all-time high signals buyer fatigue. Failure to break cleanly above the $123,200 daily supply zone would validate this bearish pattern and stall further price discovery. Onchain data supports this cautious outlook. Bitcoin's daily relative strength index (RSI) dropped sharply to 51.7 from 74.4, indicating exhaustion in the spot market, while daily trading volumes fell to $8.6 billion—both signs of waning 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. Although futures open interest remains elevated at $45.6 billion, rising long-side funding suggests growing overconfidence. Additionally, 96.9% of Bitcoin’s supply remains in profit, signaling a high potential for profit-taking. August historical returns further reinforce this cautious stance. Over 60% of August periods have closed in the red, with an average return of -2.56%, indicating seasonal headwinds. Combined with weakening onchain activity—such as falling active addresses and transfer volumes—Bitcoin may face retracement pressure in the coming weeks.

Potential Catalysts for a Rally

This bearish outlook could be overturned on Wednesday. The US White House is expected to release a strategic crypto policy report that may introduce a Bitcoin Reserve Framework and delta-neutral accumulation strategies, potentially boosting spot ETF flows and Bitcoin 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 may already be priced in due to July’s consistent neutral tone. However, any dovish commentary from Fed Chair Jerome Powell could shift market sentiment. If Powell hints at a potential rate cut in September, markets may front-run this expectation, driving Bitcoin to break above $123,000 and push to new highs.

Frequently Asked Questions (FAQ)

Bitcoin Market Dynamics

Q: What is driving Bitcoin's current price action? A: Bitcoin's price action is influenced by liquidity absorption, short liquidations, and upcoming economic events like the FOMC meeting and a US White House crypto policy report. Q: What is the significance of the $122,000 to $123,200 price range for Bitcoin? A: This range represents a key area of sell-side liquidity and previous price resistance, making it a target for potential upward price movement as bulls aim to clear these levels. Q: What are the indicators suggesting a potential slowdown in Bitcoin's momentum? A: Weakening indicators include a sharp drop in the daily RSI, declining trading volumes, reduced spot BTC ETF flows, and a high percentage of Bitcoin supply in profit, which could lead to profit-taking. Q: How does Q3 seasonality typically affect Bitcoin's price? A: Historically, August has shown seasonal headwinds, with over 60% of August periods closing in the red and an average return of -2.56%. This suggests potential retracement pressure. Q: What potential catalysts could lead to a Bitcoin rally? A: Key catalysts include the release of a US strategic crypto policy report from the White House, which might introduce new frameworks for Bitcoin, and dovish commentary from the Fed Chair indicating a potential rate cut.

Crypto Market AI's Take

The current market sentiment for Bitcoin indicates a critical juncture. While short-term technicals suggest a potential upward move driven by liquidity targeting and short liquidations, longer-term on-chain data points to cooling institutional interest and potential buyer fatigue. The approaching FOMC meeting and the White House's crypto policy report are significant events that could catalyze a breakout or reinforce existing bearish trends. For traders looking to navigate this volatility, understanding market dynamics and utilizing AI-driven tools can provide a crucial edge. Our platform offers advanced AI crypto trading bots and AI analysts that leverage sophisticated algorithms to interpret complex market data and identify potential trading opportunities, helping you make more informed decisions in this dynamic environment.

Bitcoin bulls aim to chase liquidity at 22K, but Q3 seasonality could stall breakouts