Bitcoin steadied around $120,000 on Friday as traders weighed whether the market is setting up for a short squeeze. After hitting a local high near $121,100, BTC cooled but kept its key support intact.
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Popular trader CrypNuevo noted that liquidations at $120,000 have already been cleared, opening the path toward the next liquidity zone. “Now we’re in this liquidity pool which represents an imbalance in the chart and needs to be fully retraced at $123.2k,” he wrote on X.
Data from CoinGlass also showed heavy bids forming around $118,500, a level that could act as support if the price corrects before another leg up.
Open Interest Creates Risk of Leverage Flush
The big question is whether Bitcoin’s record futures open interest, now standing at $88.7 billion, is setting up the market for a major squeeze.
Trader BitBull said the size of leveraged positions could force a sharp reset. “In the next 1-2 weeks, BTC and alts will have a big leverage flush,” he warned. “This will force people to sell their coins as they think Uptober is over. After that, Bitcoin and alts will rally again and hit new highs.”
Such a flush would be painful in the short term but could ultimately clear the way for another breakout.
Bearish Divergences Raise Questions
Not all signals point to immediate strength. Trader Roman pointed to bearish divergences on both daily and weekly charts, noting that relative strength index (RSI) readings are falling even as the price pushes higher.
“I wonder how long Bitcoin can ignore these bear divergences and lack of momentum,” he said. “Volume is also telling us there’s a lack of strength. It’s only a matter of time before they play out. Be careful holding here.”
On shorter timeframes, Bitcoin’s four-hour RSI remains firmly in overbought territory, adding to expectations that a cooling period could come before the next push higher.
At the time of writing, Bitcoin is sitting at $120,679.84.
