Bitcoin trades in narrow range as liquidation risks increase

Bitcoin (BTC) is facing limited pressure, trading below $77,000 at the time of writing on Tuesday after recovering in the previous session.

Early signs point to a return of institutional demand, with US spot Bitcoin exchange-traded funds (ETFs) recording inflows on Monday and ending a four-day streak of outflows.

At the same time, Bitfinex’s latest Alpha report indicates that Bitcoin, often described as the “king of cryptocurrencies,” remains trapped within a narrow trading range, while near-term liquidation risks are increasing.

Early signs of returning institutional demand

Institutional demand started the week on a positive note, with SoSoValue data showing that spot Bitcoin ETFs recorded $160.04 million in net inflows on Monday, ending a four-day streak of outflows that began last week. If inflows continue throughout the week, Bitcoin could extend its recovery.

Bitfinex: Liquidation risks are building around Bitcoin

Bitfinex’s Alpha market report released on Monday said Bitcoin’s recent consolidation reflects easing selling pressure but still lacks sufficient demand to support a sustained breakout. Bitcoin has remained within a 5.5% trading range for more than 24 trading sessions, while leverage has continued to build at both ends of the range.

“At the same time, rising energy costs, higher real yields and declining consumer confidence are creating a more challenging macroeconomic backdrop ahead of the Federal Reserve’s interest rate decision on Wednesday,” the analyst added.

According to Bitfinex’s Alpha market report, the main liquidation zones are concentrated around $82,000 on the upside and between $75,000 and $76,000 on the downside. A sustained break above $82,000 could trigger the main cluster of short liquidations, while a drop below $76,000 could unleash a cascade of long liquidations. Liquidation clusters commonly build when prices remain confined within a narrow range for an extended period.

The analyst further explained that the difference between the two liquidation zones is that the upper zone contains a relatively limited number of positions concentrated around the specific $82,000 price level. By contrast, liquidation levels in the lower zone are distributed more evenly and collectively represent a large number of long positions that could potentially be liquidated.

“With this week’s interest rate decision approaching, it would not be surprising to see both zones tested, with the nature of any move determined by the different liquidation structures sitting immediately outside the boundaries of the current trading range,” the analyst concluded.