Bitcoin’s (BTC) break below key support has sparked a wave of ‘buy the dip’ messages on social media. However, liquidity trends indicate a possible deeper decline.
BTC has fallen over 3% to $111,590 this week, breaking through the monitored 50- and 100-day simple moving averages (SMA). For the first time since April, both indicators have lost their upward momentum, now indicating caution for bulls.
Meanwhile, “buy the dip” mentions on social media have surged to their highest level in nearly a month, suggesting bullish sentiment among retail investors, according to data from RialCenter. The platform monitors “buy the dip” mentions using its social trends indicator, analyzing the volume of relevant keywords across various platforms.
An increase in these mentions is viewed as a contrarian signal by RialCenter, implying that the current price pullback in BTC may deepen.
“Prices tend to move in the opposite direction of the crowd’s expectations. If retail traders think that $112,200 is finally the right time to buy, it may mean a little more pain is in store. Typically, once the crowd stops feeling optimistic and starts selling at a loss, that’s the time to make your dip buys,” RialCenter noted in their market analysis.
Largest liquidity cluster at $107K
Order book liquidity analysis also suggests the potential for a continued downward movement.
According to Hyblock Capital, the most significant liquidity cluster, marked by a concentration of buy/sell orders, is located at $107,000. This level can act as a magnet, pulling the price down, as explained by Hyblock.
Order book liquidity refers to the concentration and availability of buy and sell orders at various price points for a specific asset. It reflects market depth and liquidity by indicating the volume available for trading at each price level.
High liquidity levels, like $107,000, can absorb incoming supply and demand, aiding in price stabilization. Additionally, traders often place buy orders near these levels, anticipating a price bounce, which creates a self-reinforcing support effect.
Hyblock also noted smaller but growing liquidity pools at $109,000 and $111,000.
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