Bitcoin shows resilience amid Fed liquidity squeeze, targeting to break $65K for further gains.
- Price outlook of Bitcoin is looking good despite liquidity squeeze. Bitcoin’s key liquidity level is at $65K.
The Federal Reserve’s liquidity squeeze is well underway, with net liquidity falling by around $200 billion since Monday.
This decline is due to corporate tax payments increasing the Treasury General Account, followed by a likely rise in Reverse Repo usage towards the end of the month.
The market is now about halfway through this liquidity squeeze, which is expected to continue for another seven trading days.
Another $100 billion to $300 billion of liquidity could be drained before October 1. However, despite this tightening, major risk assets such as US stock indices, gold, and Bitcoin [BTC] have surged, boosted by the Fed’s recent 50 basis point rate cut.
Source: Tomas/X
Bitcoin markets have largely shrugged off the short-term liquidity crunch, but caution is still advised until this liquidity storm passes.
Can Bitcoin continue its rally despite the Fed’s liquidity drop?
Over $2B in Bitcoin future contracts opened
Despite the drop in liquidity, several indicators suggest Bitcoin could continue its upward trajectory. One such sign is the surge in open interest in futures contracts.
Over $2 billion in Bitcoin futures contracts were opened within just 48 hours. While this sharp increase could lead to a potential long-squeeze, it also shows that traders are optimistic about Bitcoin’s future price.
The Federal Reserve’s rate cut seems to have eased concerns about liquidity, encouraging traders to bet on Bitcoin reaching higher levels.
Source: Coinalyze/X
Another positive signal comes from the Coinbase Premium index, which measures the price difference between Bitcoin on Coinbase and Binance.
Currently, the Coinbase Premium is negative, meaning Bitcoin is cheaper on Coinbase than on Binance. This pattern, known as divergence, typically suggests strong buying pressure, particularly on Binance.
When two related metrics move in opposite directions, it often signals a reversal, suggesting that Bitcoin’s recent downtrend may have found its bottom.
Source: CryptoQuant
Even though Bitcoin’s price hasn’t dropped, this buying pressure indicates that Bitcoin could be set for a price increase.
Key levels and liquidation zones for the next move
Liquidation levels are essential for traders, as they help identify zones where the price may move to pick up liquidity. Currently, Bitcoin’s key liquidity level is at $65,000.
If Bitcoin breaks above this level, it is likely to target $75K, where significant liquidity awaits.
A break above $65K would not only bring Bitcoin closer to this next target but also confirm a bullish market structure. It would signal a higher high, following the recent higher low seen after Bitcoin’s price dip in August.
Source: Coinglass
Despite the ongoing Fed liquidity squeeze, Bitcoin has shown resilience, with several indicators pointing towards a continued rally.
The rise in open interest, strong buying pressure on Binance, and key liquidity levels all suggest that Bitcoin’s price could move higher in the coming weeks.
Traders should watch for a break above the $65,000 level, which could signal a significant upward move to $75,000. However, caution remains essential until the liquidity storm fully passes.
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