Bitcoin Sell-Off Triggers Liquidations, but Rising Open Interest Signals Possible Recovery

Bitcoin’s retreat from its recent all-time high of $124,474 has rattled markets, but underlying data suggests bulls may already be stepping in to stabilize prices.

The cryptocurrency slipped as much as 6.7% to below $115,000, a drop deeper than many analysts expected. The correction followed a familiar pattern: traders taking profits at record highs while others entered short positions, intensifying downward pressure.

Profit-taking meets liquidity sweeps

Andre Dragosch, head of research at Bitwise Europe, noted that short-term holders have been taking profits more aggressively, though the scale of selling has been shrinking over time. Still, the weekend sell-off coincided with what analysts describe as a “liquidity sweep” — a common occurrence in thin weekend markets where built-up liquidation targets are flushed out.

Shubh Varma, co-founder and CEO of Hyblock, explained that pools of liquidity had accumulated below Bitcoin’s recent range. As those levels were breached, order book depth flipped bearish, triggering a cascade of liquidations. “Liquidity sat below, slippage spiked, and both 1% and 2% bid-ask depth turned negative,” Varma said.

Institutional demand remains strong

Despite the weekend turbulence, Varma pointed out that digital asset treasuries (DATs) and institutional buyers have remained active during the week, with recent BTC and ETH purchases far outpacing new supply, even after large Ethereum unstaking events increased sell-side pressure.

The challenge, he noted, is timing: institutional flows typically dry up on weekends, leaving crypto markets more vulnerable to sharp moves.

Open interest hints at support

One encouraging signal for bulls is the surge in open interest during the sell-off. According to Varma, the same zones where liquidity was swept also saw a spike in both long and short positions. With many short sellers now trapped, these levels could provide near-term support and a potential base for recovery.

While some analysts warn Bitcoin could test the $110,000 level, the combination of dip-buying, institutional inflows, and elevated open interest suggests the sell pressure may prove temporary.