Bitcoin (BTC) Price: Market Exhaustion Takes Hold After $1.5B Liquidation Wave

TLDR

• Bitcoin has fallen to a four-week low of $108,700, dropping below key support at $112,000
• Long-term holders have realized 3.4 million Bitcoin in profit, potentially signaling market “exhaustion”
• ETF inflows have slowed following the Federal Reserve’s recent rate cut
• Some Bitcoin holders have begun selling at a loss, with the Spent Output Profit Ratio (SOPR) at 1.01
• U.S. economic data and Friday’s PCE inflation report may impact Bitcoin’s near-term price action

Bitcoin has fallen to its lowest level in four weeks, dropping below $109,000 as market indicators suggest potential “exhaustion” following the recent Federal Reserve rate cut. The world’s largest cryptocurrency hit $108,700 on Coinbase in late Thursday trading, breaking below important support levels around $112,000.

The recent price action comes as long-term holders have realized profits on 3.4 million Bitcoin, according to on-chain analysis firm Glassnode. This significant profit-taking activity coincides with slowing inflows into Bitcoin exchange-traded funds (ETFs).

Market analysts point to several concerning signals. The realized profit/loss ratio has exceeded 90% of coins moved three separate times during this market cycle, with the market having just moved away from the third such extreme.

Historically, these peaks have marked major cycle tops, suggesting a cooling phase may lie ahead for Bitcoin prices.

The Spent Output Profit Ratio (SOPR) currently sits at 1.01, according to Glassnode data. This metric is closely watched by traders because it shows that some Bitcoin holders are beginning to sell at a loss.

In bull markets, when the SOPR dips below 1, it can indicate seller exhaustion and often precedes price rebounds. However, the current reading suggests the market sits at a critical junction.

Market Liquidations Impact Price

Bitcoin fell sharply at the start of the week when a wave of liquidations wiped out approximately $1.5 billion in long positions across crypto exchanges. Reports indicate that thin market liquidity and heavily leveraged bets deepened the selloff.

This move unsettled sentiment across the digital asset space, with most altcoins also extending losses on Thursday. Ethereum dropped below $4,000 to $3,962, its lowest level in nearly seven weeks.

Other major cryptocurrencies also saw declines, with XRP falling 1.6% to $2.83, Solana dropping 6%, and Dogecoin sliding 5.5%.

Bitcoin had attempted a modest recovery on Wednesday, briefly climbing near $114,000, but failed to sustain momentum. The token was trading at approximately $111,410 as of Thursday morning.

Economic Data Influences Crypto Market

Traders remain cautious ahead of key U.S. economic data releases after Federal Reserve officials signaled a careful approach to future interest rate cuts. Fed Chair Jerome Powell stated earlier this week that there was “no risk-free path” in setting policy.

The U.S. economy expanded faster than first estimated in the second quarter. Revised figures showed GDP rising at a 3.8% annualized pace, above the initial 3.3% reading. However, economists warn that growth is expected to slow to about 1.5% for the full year.

Labor market figures released Thursday offered signs of cooling. Initial claims for state unemployment benefits fell to 218,000 for the week ended September 20, below economists’ forecasts of 235,000.

Investors now await Friday’s personal consumption expenditures (PCE) price index report, forecast to show core inflation running near 2.9% year-on-year, still above the Fed’s 2% target.

The cautious stance from Fed officials has curbed risk appetite across financial markets, including cryptocurrencies.

Some analysts remain optimistic despite the recent downturn. Strategy chair Michael Saylor suggested earlier this week that Bitcoin will gain in Q4 after macro headwinds subside.

However, 10x Research head Markus Thielen noted in a recent report that the market setup could produce a surprise correction rather than the Q4 rally many investors are positioned for.

Glassnode concluded that unless demand from institutions and holders aligns again, “the risk of deeper cooling remains high, highlighting a macro structure that increasingly resembles exhaustion.”

The Short-Term Holder Net Unrealized Profit/Loss (NUPL) metric is approaching zero, which could potentially trigger further liquidations as newer holders quickly cut their losses.

Bitcoin was trading at $109,645 at the time of writing, having lost 6.5% over the past week.

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