Bitcoin shows signs of local bottom as short liquidity clusters form
BTC is displaying signs of reaching a local bottom, sparking a potential recovery or relief rally. Significant short positions, up to $113,000, may lead to a short squeeze and price rebound, but this does not guarantee continuous upward momentum. BTC recently avoided dropping below $100,000, bouncing back to $103,743.15, and triggering $18.33M in short liquidations in four hours. Although trading remains fearful and volatile, BTC dominance is at 58.4%, driven by altcoins' underperformance. There are market indications of a potential bottom, such as short-term holders capitulating, increased whale spot orders, and ETF purchases. Despite extreme fear and high volatility, BTC retains its ascending channel, and its general bullish trend remains intact.
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Potential BTC Relief Rally Triggered by Short Liquidation
Cumulative short positions up to $113,000 might trigger a relief rally for BTC. The leading cryptocurrency shows signs of reaching a local bottom, with speculations of further recovery. One possible catalyst for a recovery could be a short squeeze, liquidating positions up to $113,000. Liquidity is rebuilding on the upside, historically leading to rapid price rallies. Significantly, BTC has already rebuilt short liquidity, which previously led to a rapid recovery above $103,000.
Conditions and Limitations of BTC Price Movements
While accumulated short liquidity is high, it does not guarantee a continuous climb. In October, short liquidity reached as high as $130,000, yet it did not result in a significant short squeeze. On the downside, BTC may sweep long positions in the high-leverage cluster around $100,500. It is worth noting that BTC's open interest has recently increased by $1B, rising to $33.52B, with 71% of positions being long on average. However, exchanges like Hyperliquid see over 43% of whales taking short positions.
BTC Trading Sentiment and Market Volatility
BTC trading is dominated by extreme fear, as the Fear & Greed Index has recently risen to 23 points, up from a low of 21 points. BTC is also experiencing its highest volatility in six months at 1.98%, leaving the market unpredictable. Although the leading coin has not lost its ascending channel or entered a bear market, its price fluctuations cause concern. Current dominance of BTC is 58.4%, reflecting the weakness of altcoins rather than Bitcoin's inherent strength.
Signs of a BTC Local Bottom Formation
BTC appears to have bounced from the $100K range, suggesting this level may act as a local bottom. Avoiding a breakdown under $100K, BTC recovered from its weekly lows. Despite the ongoing fear, the coin has demonstrated resilience, rallying in a short timeframe. Shortly after forming high-leverage short positions up to $105,000, BTC recovered to $103,743.15, sparking a market-wide recovery.
Impact of BTC Recovery on the Market
BTC's recovery also impacted ETH, with the token climbing back above $3,400. The short-term rally caused $5.9M in BTC short liquidations and $9.6M in ETH short liquidations. On a four-hour basis, BTC saw $18.33M in short liquidations, while long liquidations still dominated on a 24-hour basis, exceeding $300M.
Further Market Trends Supporting BTC Bottom
Other factors hinting at a BTC market bottom include short-term holder capitulations and increasing whale spot orders. Additionally, ETFs have returned to purchasing more BTC. Although the recent market downturn has signaled a shift in sentiment, it has not marked the breakdown of the broader bullish trend.