Bitcoin just did the one-two that rattles nerves and sets up opportunity: price slipped under $113K while coins on exchanges fell to a 10-year low. That mix—lower price, tighter tradable supply—often precedes trend pivots. Add a leveraged flush and normalized funding, and you have a market that looks weak on the surface but is quietly reloading underneath.

What just happened

Bitcoin dropped roughly 10% this week, trading between $109,883 and $125,023, now ~9% below its Oct. 6 peak near $126,080. Spot volume fell ~25% to about $69B. Derivatives saw a slight volume uptick to $109.97B while open interest slid 1.8% to $73.36B—a classic sign of positions being closed, not added, after the tariff-driven selloff.

Why it matters to traders

Exchange balances have dropped to ~2.4M BTC—the lowest since 2015—signaling ongoing accumulation by long-term holders, institutions, and ETFs. Less supply on exchanges typically reduces immediate sell pressure and can amplify upside when demand returns. Meanwhile, a broad liquidation reset—about $19B wiped on Oct. 10—has historically cleared the path for healthier rebounds.

Key on-chain and derivatives signals

• Supply squeeze: Persistent outflows to custody/cold wallets tighten available float; similar dynamics preceded 2020–2021 rallies.
• Leverage reset: Falling open interest with steady volume suggests de-risking rather than fresh shorts.
• Funding normalized: Per XWIN Research Japan, funding rates are back to neutral—froth removed.
• aSOPR > 1.0: Shift from panic selling to realized-profit absorption, often seen at early rebuild phases.
• Momentum mixed: RSI ~44, MACD slightly bearish—range conditions, not a trend breakdown.

Levels that matter

The $108K zone (near the 200-day) is firm structural support. A daily close above $116K–$118K would signal fresh strength and reopen a path to $125K. Lose $110K, and the market likely probes $105K liquidity.

Actionable playbook

• Respect the range: Fade extremes with tight risk—consider scaling in near $108K–$110K support; trim into $116K–$118K resistance until a breakout confirms.
• Wait for confirmation: A breakout + rising spot volume + stable/declining OI is a higher-quality long trigger.
• Watch supply cues: Continued exchange outflows + rising ETF inflows strengthen the upside case; reversals weaken it.
• Risk management: Size positions for volatility; predefine invalidation below $108K if your thesis is trend-continuation.

Risks to respect

Macro headlines (tariffs, rates, liquidity) can overwhelm on-chain positives. If exchange balances start rising and funding turns aggressively positive while price stalls, expect a lower-high setup and renewed downside. Be alert to weekend gaps and thin liquidity.

Bottom line

What looks like weakness is increasingly a rebuild phase: lower exchange supply, normalized leverage, and solid long-term support. The bias is neutral-to-constructive while $108K holds; momentum flips bullish on a $118K reclaim with supportive flow data.

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