Bitcoin is seeing some short-term relief after bouncing back toward $70,000, offering a brief respite following weeks of steady pressure. This move has improved near-term momentum and reduced immediate downside risks. Still, the broader market remains uncertain, with many analysts viewing this uptick as a temporary rally within a larger correction rather than the beginning of a new bull run.
According to analysis from XWIN Research Japan, while prices have recovered significantly from recent lows, underlying derivatives data point to caution. Open Interest has dropped sharply from earlier cycle highs, reflecting widespread deleveraging in futures markets. Notably, the recent price decline happened alongside falling Open Interest, suggesting the selloff was driven more by forced liquidations and derivatives unwinding than by sustained selling of spot Bitcoin. Such resets can be healthy, as they reduce excessive leverage and stabilize funding conditions. However, a cleaner derivatives landscape doesn’t automatically mean new structural demand is emerging. Without clear signs of renewed capital inflows or stronger spot market participation, the current rebound could remain fragile.
Recent exchange flow data adds further nuance to Bitcoin’s recovery. Binance’s Fund Flow Ratio remains low, around 0.012, indicating limited inflows relative to the platform’s total Bitcoin reserves. This suggests sell-side pressure hasn’t intensified, even during the recent dip toward the mid-$60,000 range. The absence of a spike in this metric implies investors aren’t rushing to move coins to exchanges in panic—a pattern often seen during more aggressive selling phases.
That said, low inflows shouldn’t be mistaken for accumulation. The medium-term trend in the ratio’s moving averages continues to drift lower, signaling that sustained structural demand hasn’t yet returned. Markets can stabilize without immediately shifting into expansion, especially when liquidity conditions remain cautious.
Derivatives positioning adds to this mixed picture. With leverage still relatively low, upward price moves can trigger short liquidations, fueling rallies driven more by position unwinding than new capital. Such rebounds often lift sentiment temporarily but may lack staying power without stronger spot market involvement.
Overall, Bitcoin appears to be moving from active selling toward stabilization. For a true bullish reversal to take hold, the market will likely need consistent inflows, improving liquidity, and clearer signs of renewed investor demand.
Bitcoin remains under pressure after a sharp correction from recent highs, with prices now hovering around $68,000. The weekly chart shows a clear loss of upward momentum after a rejection around the $110,000–$120,000 zone, followed by a break below the 50-week and 100-week moving averages. This typically signals weakening intermediate trend strength, not just short-term volatility.
Price is currently testing the 200-week moving average, a key historical support level during market transitions. Holding this level could help stabilize sentiment and set a medium-term floor. However, a sustained break below it would likely increase downside risks, confirming a deterioration in the long-term trend structure.Craters as Capital Withdraws from the Network for a Second Month
Trading volume is also worth noting. The recent selloff happened alongside higher activity compared to earlier periods of sideways movement. This suggests the decline was driven by selling pressure, not just low liquidity. However, volume has begun to ease as the price stabilizes, pointing to less urgency from sellers.
Bitcoin seems to be entering a phase of defensive consolidation. To regain bullish momentum, the price would need to recover above the shorter-term moving averages. Conversely, if it fails to hold its current support level, the corrective downturn could continue.
Frequently Asked Questions
FAQs Engine Stalled The 8 Billion October Shock Bitcoins Liquidity Crisis
Beginner Definition Questions
1 What does Engine Stalled mean in this context
Its a metaphor describing how Bitcoins spot market suddenly lost its ability to function smoothly due to a massive unexpected drain of liquidity
2 What is a liquidity crisis in crypto
Its when there arent enough active buyers and sellers in the market This makes it hard to buy or sell assets quickly without causing the price to swing dramatically Its like a marketplace with very few traders a single large order can disrupt everything
3 What was the 8 Billion October Shock
It refers to a specific event in October 2023 where approximately 8 billion worth of liquidity was rapidly pulled from Bitcoins spot market order books across major exchanges This sudden withdrawal shocked the markets normal operations
4 What is a spot market
The spot market is where cryptocurrencies like Bitcoin are bought and sold for immediate delivery and settlement Its the primary market most retail investors use as opposed to futures or derivatives markets
Advanced Mechanic Questions
5 How does 8 billion leaving order books cause a crisis Wasnt that money just sitting there
Yes it was sitting there as open buy and sell orders When market makers and large traders pull these orders the markets cushion disappears The gap between the highest buy order and lowest sell order widens dramatically making trading costly and volatile A 1 million trade could then move the price 2 instead of 01
6 What triggered this massive liquidity withdrawal
The primary trigger was a sharp rise in US Treasury yields and a stronger US dollar in October 2023 This made traditional lessrisky assets more attractive Large institutional players and market makers who provide most liquidity pulled capital from risk assets like Bitcoin to rebalance portfolios or meet margin calls elsewhere creating a domino effect
7 Whats the difference between a price crash and a liquidity crisis
A price crash is a sharp decline in an assets value