Bitcoin bulls are setting their sights on a liquidity cluster at $122,000, but historical seasonal trends and some weakening indicators could present significant headwinds to a sustained breakout. While a successful push could trigger a sweep of external liquidity, several factors suggest caution.
Bitcoin briefly dipped below $117,000 recently, sweeping internal liquidity that had built up between $117,000 and $119,000. This move liquidated around $100 million in long positions. Despite this, the 100-day exponential moving average (EMA) on the four-hour chart has provided dynamic support, limiting downside risk in the short term.
The next key area of interest for buyers lies between $120,000 and $122,000, where stop orders are clustered. This area also aligns with a daily supply zone between $121,400 and $123,200, which previously acted as price resistance. BTC liquidation map data indicates that roughly $2 billion in short positions could be liquidated around $121,600.
However, several factors could stall the bullish momentum. Bitcoin's relative strength index (RSI) has fallen from 74.4 to 51.7, signaling weakening momentum. Daily trading volumes have also decreased by 40% to $8.6 billion. Spot Bitcoin ETF inflows, a key driver of institutional demand, have also cooled, falling 80% to $496 million weekly.
Historically, Q3 has not been a strong period for Bitcoin. August, in particular, tends to be bearish, with over 60% of the month closing in the red and an average return of -2.56%. Bitcoin's median return from June 1 to September 30 has been only 1% over the past decade. Some analysts believe Bitcoin is currently trading more like a risk asset than a safe haven, making it vulnerable to market fluctuations. The third quarter has exhibited the weakest seasonality on record.
On-chain metrics reveal that nearly 97% of the Bitcoin supply is in profit, increasing the risk of profit-taking and short-term volatility. The Stablecoin Supply Ratio (SSR) is also rising, suggesting weaker capital inflows and potentially limiting upside potential. A high MVRV Z-score also indicates elevated unrealized profits among holders, which could lead to profit-taking.
Despite these headwinds, potential catalysts could still trigger a rally. The White House is expected to release a strategic crypto policy report, which may include a Bitcoin Reserve Framework and delta-neutral accumulation strategies that could boost spot ETF flows. A dovish stance from the Federal Reserve at the upcoming FOMC meeting could also spur markets. Some anticipate Bitcoin could go higher in Q3, though it may not be a runaway trend. A potential Fed rate cut in July may boost Bitcoin, but historical data shows Q3 tends to be flat.
However, analysts caution that the absence of robust buy-side liquidity until $114,500 means any near-term pullback could accelerate. A break down below the $100,000 level could see the market drop to the 50-week EMA at $88,000. The current ascending support line is also a key level to watch, as a decisive daily close below it could invite deeper downside.
Overall, Bitcoin's path to $122,000 is fraught with challenges. While the potential for short liquidations and positive news could drive prices higher, seasonal trends, weakening momentum, and on-chain data suggest that bulls should proceed with caution.
