Factors Potentially Capping Bitcoin’s Price Recovery at $90,000

Bitcoin’s price recovery is facing potential challenges, with a current upward movement showing a 3.77% gain in April after significant drawdowns earlier in the year. The ongoing price cap around $90,000 may result from limited spot market participation and the current leverage-driven rally. Additionally, large liquidation clusters between $80,000 and $90,000 may create volatility as traders position themselves. Collectively, these factors suggest Bitcoin’s advance towards $90,000 may be constrained without broader market support.

In the wake of a 17.39% and a 2.3% drawdown in February and March, Bitcoin (BTC) has shown signs of recovery in Q2, gaining 3.77% in April. With new yearly lows recorded at $74,500, BTC is now hovering closer to the $90,000 mark, indicating a bullish market sentiment as the first breakout of 2025 takes place.

However, several factors may restrict BTC’s upward movement, potentially capping its price at approximately $90,000 in the short term. A vital element for Bitcoin’s price growth is the need for significant spot volume, rather than relying solely on leverage.

Cointelegraph has observed a cooling phase in the futures markets, with the BTC-USDT futures leverage ratio decreasing by 50%. Although this de-leveraging reflects a long-term positive trend, the current market is still predominantly controlled by derivatives traders.

Bitcoin researcher Axel Adler Jr. noted an increase in cumulative net taker volume to $800 million on April 11, which corresponds with an abrupt price jump from $78,000 to $85,000, consistent with historical patterns where such volume is indicative of price surges. Nevertheless, analyst Maartunn emphasised that the ongoing rally appears to be driven by leverage, with spot traders not yet having a significant impact on the market.

Current data shows that while Bitcoin’s apparent demand is on a recovery path, it has yet to become net positive. Historically, a sideways movement in apparent demand can occur after BTC reaches a local bottom, suggesting that BTC may struggle to surpass the $90,000 threshold without increased buying pressure from both spot and futures markets.

Moreover, the presence of large liquidation clusters between $80,000 and $90,000 poses risks to traders. CoinGlass reports that substantial cumulative long and short liquidation leverage exists in this range. Specifically, a price increase to $90,035 could result in the liquidation of $6.5 billion in short positions, while a drop to $80,071 could eliminate $4.86 billion in long orders.

Although liquidation clusters do not dictate market direction, they can lead to short or long squeezes, incentivising traders on both sides of the market. Given the significant financial stakes under $90,000, Bitcoin may potentially test these liquidation clusters before following the predominant market trend.

Disclaimer: This article does not provide investment advice. All trading and investment decisions carry risks; readers should conduct thorough research prior to making any financial commitments.