Bitcoin price action screams liquidity stress

When risk assets start moving together, it’s rarely by choice. Dispersion has vanished, leaders are breaking down, and liquidity is pulling back to the sidelines. Volatility is no longer being absorbed. It’s being amplified.

The damage matters. The assets that led the risk rally are now being hit the hardest, not because the narrative changed, but because capital is being withdrawn, not rotated. That’s how selloffs turn disorderly.

Source: TradingView

Stress is already showing up in rates pricing. Expectations for Fed easing this year have jumped from 41bp to 61 basis points in just days. That’s almost a full cut being added in less than a week. Markets don’t price that unless something is tightening fast.

Bitcoin is extremely stretched and vulnerable to sharp bounces. But being stretched doesn’t mean the downside is exhausted. This feels like the point where correlations snap to one and capital preservation becomes the priority.

BTC/USD Price Action Turns Ugly

Source: TradingView

My view has long been that the biggest determinant of bitcoin’s price is the price action itself. Regardless of the drivers behind it, the market repeatedly failed to break above $123,600 in the second half of last year, with four separate weekly rejections at that level. That capped the upside and set the stage for a pullback towards $99,800 support, before price eventually broke beneath the 50WMA, a level that had repeatedly acted as support throughout last year’s bullish trend.

From there, the damage accelerated. Bitcoin sliced through $99,800 support and then coiled within a rising wedge, a bearish continuation pattern, before breaking down last week on a clear pickup in volume. The break beneath $74,400 triggered a sharp acceleration lower, pointing to widespread liquidations of long positions rather than orderly selling.

So far, price has bounced from around $60,000, which is hardly surprising given how stretched conditions have become. Bitcoin remains well below the lower Bollinger Band, RSI is firmly in oversold territory, and MACD is sitting at extreme levels relative to historical norms. A bounce back towards $74,400 is therefore entirely plausible, but unless that level is reclaimed, any strength risks being sold into.

On the downside, there is little in the way of meaningful support beneath $60,000 until $49,400, a level that acted as both support and resistance through parts of 2024.