Bitcoin consolidates amid cooling on-chain activity and inflation concerns

Bitcoin (BTC) experienced notable volatility last week, marked by sharp weekend and Monday price swings that resulted in significant liquidation in the derivatives market.

Daily liquidation data from Glassnode highlights a rare “dual-sided flush,” revealing net open interest destruction of roughly $5.7 million within 24 hours ($28.6 million long liquidations offset by $22.9 million short liquidations). This underscores the rapid shifts in leveraged market sentiment.

*Bitcoin Futures Long and Short Liquidations. Source: Glassnode*

BTC-denominated open interest fell by around 1.7% (approx. 25,000 BTC) during the period, reducing the open interest pool to approximately 334,000 BTC. This sharp decline suggests clearing of speculative leverage positions, indicative of a market reset phase.

BTC continues trading within the $100,000-$110,000 range, but decreased on-chain activity points to a consolidation phase. Metrics tracking profitability (e.g., active买家占比, Realized Cap) are fading. User participation levels remain generally subdued, suggesting traders are digesting recent price action.

From a technical perspective, Bitcoin failed to break above the external liquidity threshold near $109,000. On the 4-hour timeframe, this failure has led to a subsequent consolidation. Price action is contained within a descending channel formed since the initial move. A key support area lies between $103,400-$104,600.

Bitcoin 4-Hour Price Chart — *Bitcoin 4-hour chart (Date Range assumed). Source: Cointelegraph/TradingView or data source from image reference [Check via image source]).*

This technical formation coincides with a current daily fair value gap (FVG) and aligns with the 200-day EMA. A potential technical bounce is seen within this consolidating range, but significant upward movement necessitates a confirmed breakout above the descending channel structure.

Amid persistent consolidation in on-chain health metrics, any strengthening in bullish momentum could see BTC attempt new highs. However, the broader market structure appears receptive to consolidation until sustained demand revival occurs.

BTC faces headwinds from core inflation data

Recent events counter bullish hopes for an imminent interest rate cut. Although the Fed cited Personal Consumption Expenditures (PCE) inflation closely aligning with expectations at 2.3%, Core PCE rose to 2.7%, just slightly above the projected 2.6%. This 0.1% increase marks a return to multi-month territory, suggesting renewed upward pressure and acting as a catalyst for maintaining accommodative policy forecasts among policymakers.

Financial conditions signaled by inflation stickiness likely mean the Fed will maintain its current “pause.” Higher interest rates coupled with potentially slower inflation (“higher for longer”) weigh negatively on risk assets, including Bitcoin.

Bitcoin Total Transfer Volume — *Recent trends in Bitcoin Elasticity/Transfer Volume. Source: Glassnode Plot interpretation varies but shows cooling activity.*

On-chain data lent support to the cautious outlook. While spot volume increased moderately in Q2 (+$7.7 billion year-to-date), Transfer Volume showed a 36% drop earlier in the quarter (mentioned July figures) highlighting subdued movement or increased holding persistence among addresses.

Note: Please consider: This analysis is intended for informational purposes only and is not investment advice. Trading or investing involves significant risk. Readers are encouraged to conduct their own research before making any decisions.