Bitcoin Drops 13% As $1.30 Billion Liquidations Hit Market

Bitcoin has recently experienced a significant pullback, retesting sub-$80,000 levels as $1.30 billion in liquidations swept the market. This downturn has led to a loss of over $130 billion in market capitalization, with 478,000 addresses at $78,981 hovering near breakeven and 5.94 million wallets from $61,129 cashing out profits. Despite this, a rising bid-ask ratio indicates increasing buy-side interest, and retail long positions remain steady at 73%. Historically, such set-ups have preceded liquidity sweeps followed by sharp reversals, suggesting that this dip could be another bear trap.

Market sentiment is heavily influenced by the upcoming Federal Open Market Committee (FOMC) meeting, with markets bracing for potential rate cuts to counter post-tariff demand slowdown. Recession odds have jumped from 40% to 60%, and even major financial institutions are expecting rate cuts soon. For Bitcoin, the stakes are high, as its resilience hinges on the Fed's next move. Until then, volatility is likely, though short-term. Interestingly, Bitcoin’s long-term holders have ramped up accumulation, adding 14,000 BTC since April 6, marking a three-month high.

Derivatives positioning remains unshaken, with Funding Rates holding green throughout the week, reflecting sustained bullish leverage. However, without a surge in spot demand, this positioning risks unwinding. On-chain metrics have highlighted muted dip-buying, indicating that investors are in a risk-adjustment mode rather than accumulation. Bitcoin’s 50-50 long-short equilibrium at current levels presents a prime set-up for a bear trap. If liquidity absorbs sell-side pressure, a volatility squeeze could trigger rapid upside expansion.

Bitcoin’s bullish set-up is now showing cracks, with key support levels breaking and derivatives traders remaining heavily long. If buy-side absorption holds, a sharp reversal could be on the table. On the 12-hour heatmap, a $72.94 million liquidity cluster at $75,798 was swept, triggering a 1.20% bounce. Whether this signals absorption or just a temporary relief remains to be seen. A strong bear trap could be in the making, with growing Open Interest, mounting Fed pressure, and long-term holder accumulation at a three-month high. If liquidity clusters keep getting absorbed, Bitcoin could be ready for an aggressive reclaim.