How the $8 Billion ‘October Shock’ Left the Spot Bitcoin Market In A Liquidity Trap

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How the Billion ‘October Shock’ Left the Spot Bitcoin Market In A Liquidity Trap

Bitcoin is getting some near-term relief after a strong return to $70,000, offering some temporary hope after weeks of sustained pressure. The move boosted short-term momentum and reduced the downside risk. However, the broader market remains indecisive, as many analysts argue that this advance may represent a relief rally within a major correction structure rather than the start of a renewed bull phase.

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According to analysis from XWIN Research Japan, while the price has recovered profitably from the recent decline, fundamental data for derivatives suggests caution. Open Interest has fallen significantly from the previous cycle’s highs, reflecting a broader bearish trend across futures markets. Importantly, the recent price drop occurred in line with the Open Interest contract, indicating that forced liquidations and other derivatives-driven reversals were the main drivers of the selloff rather than ongoing spot spreads.

Bitcoin Open Interest All Exchanges | Source: CryptoQuant

Such a reset can be constructive, as it reduces leverage and stabilizes funding conditions. However, a clean derivative landscape does not automatically translate into new structural demand. Without clear evidence of renewed capital inflows or increased local participation, current iterations may remain vulnerable to renewed volatility.

Muted Exchange Flows Suggest Stability, Not Yet Structural Strength

Recent data volatility adds contrast to the current phase of Bitcoin adoption. Binance’s Fund Flow Ratio remains low near 0.012, indicating that the income relative to the amount of BTC reserves on the platform is limited. In practical terms, this suggests that immediate selling pressure is not yet strong, even in the mid-$60K range. The absence of a spike in this metric means that investors are not rushing to transfer coins to the exchange due to panic, which is often accompanied by aggressive distribution phases.

Bitcoin Binance Fund Flow Ratio | Source: CryptoQuant

However, low penetration should not automatically be interpreted as accumulation. The medium-term trend of moving averages continues to decline, indicating that ongoing demand for property should still strengthen. Markets can stabilize without transitioning to expansion, especially if liquidity conditions remain cautious.

Additional context from the derivation setting emphasizes this ambiguity. Since profits are still relatively compressed, upward price movements can equally cause short liquidations, creating rallies driven more by resting positions than new capital flows. This type of rebound usually improves sensation temporarily but may lack durability without strong local involvement.

Overall, Bitcoin appears to be transitioning from active trading to stability. Confirmation of a true bullish reversal will require consistent inflows, improved liquidity, and clear evidence of renewed investor demand.

Bitcoin Testing Support After Sharp Correction

Bitcoin remains under pressure following the announced correction from its recent highs, and the price is currently settling near the $68,000 region. The weekly structure shows a clear loss of upward momentum after rejection in the $110K–$120K area, followed by a significant break below the 50-week and 100-week moving averages. These changes usually indicate a weakening of the trend’s average strength rather than simple short-term volatility.

BTC holds key demand rate | Source: BTCUSDT chart on TradingView

The price is now close to the 200-week moving average, historically an important structural support during changing market phases. Holding this level can help stabilize sentiment and may define an intermediate-term bottom. However, a further downward trend may increase the downside risk, as it will confirm the breakdown of the long-term trend structure.