Bitcoin’s Liquidity Challenge: Can BTC Avoid a Prolonged Bear Market?

• The recent drop in Bitcoin’s price and trading volume raises concerns about the availability of new liquidity to sustain a bull market.
• Analysts caution that without fresh capital inflows, BTC may face prolonged consolidation between $75,000 and $100,000, similar to trends seen in early 2024.

Bitcoin (BTC) price is at a critical juncture as on-chain metrics indicate the market is at a turning point. With recent price drops and concerns regarding liquidity inflows, analysts are looking closely to see if BTC will escape falling into a long-term bear market.

Bitcoin On-Chain Indicators Signal Caution Amid Liquidity Concerns

CryptoQuant CEO Ki Young Ju has pointed out that Bitcoin’s on-chain indicators are presently at the edge of a bearish and a bullish market, as mentioned in our previous news article. Although he is bullish about a prolonged bull cycle, he does recognize that the direction of the market in the next month will be pivotal.

“We need at least another month of data to confirm whether we’re entering a bear market,” Ju stated in a post on X. He further noted that if demand does not recover, indicators may fully signal a downtrend, shifting market sentiment further bearish.

Ju had also proposed that the two-year trend of Bitcoin suggests a bull market running through until April 2025. Nonetheless, recent market activity has put the next couple of weeks at a critical stage for the path of BTC. 

Source: Ki Young Ju

One of the key issues for Bitcoin’s market perspective is liquidity. In the past, BTC price increases have been fueled by new capital inflows. Yet, as Bitcoin neared the $100,000 level, trading volume was quite strong, indicating potential distribution.

“In distribution phases, prices drop when new liquidity dries up,” Ju said as he emphasized the role of fresh capital coming into the market. The question now is where this new liquidity will materialize and whether it will be sufficient to carry the bull market. Without a strong catalyst to propel demand, Bitcoin can go into a long consolidation period, possibly between $75,000 and $100,000 for a long time, as in early 2024, as noted in our earlier post.

BTC Price Struggles Amid Sell-Off

The BTC price has been under relentless selling pressure, dropping more than 15% in the last week. Following the fall below the critical $94,000 support level, Bitcoin maintained its bearish momentum, breaking through $85,000. By Friday, the digital currency was trading at around $81,000, with some experts warning of a possible plunge to $73,000 if the correction continues.

The technical indicators are bearish. The daily Relative Strength Index (RSI) has dropped to 21, well into oversold levels. Although this indicates the potential for a short-term bounce, traders are still wary, as the RSI may remain in oversold levels if selling pressure continues.

Even with the drop, Ju is still bullish that Bitcoin won’t experience a steep fall beneath $77,000. “Even in the worst case, I see a high probability of consolidating around 77K for a few months before moving back up,” he indicated.

Thus, he warned traders against taking on sharp leveraged bets in either direction at this time. Meanwhile, since the upcoming Bitcoin price action remains unclear, market players are observing if demand picks up or if the absence of liquidity marks the beginning of a longer bearish cycle.