BTC Slips Below $120K as Policy Shifts Rattle Markets: Is This a Setup for the Next Big Rally?

[Ben Graham]

Bitcoin’s record-breaking rally hit a pause this week as shifting U.S. policy signals triggered a sharp pullback. After surging to an all-time high of $124,457 on August 13, BTC plunged as low as $117,477 on Friday morning before stabilizing around $119,000.

The 5% drop followed U.S. Treasury Secretary Scott Bessent’s comments ruling out additional government Bitcoin purchases for strategic reserves, sparking $1 billion in leveraged liquidations.

Despite the correction, on-chain data suggests the market may be setting up for another leg higher. Exchange netflows have dipped to levels historically seen before major bull runs in 2017 and 2021, signaling reduced selling pressure from long-term holders.

Short-Term Bitcoin (BTC) Holders Show Strength Amid Volatility

One of the most striking trends has been the resilience of short-term holders (STHs), defined as addresses holding Bitcoin (BTC) for 155 days or less.

Instead of selling into the rally, STHs have shifted toward accumulation, as reflected in the rebound of the STH Spent Output Profit Ratio (SOPR) above the neutral line.

This indicates that coins moved by STHs are being sold at a profit, yet without triggering large-scale profit-taking. Market analysts view this conviction as a stabilizing force that could help absorb selling pressure and support higher prices in the coming weeks.

Derivatives Market Points to Aggressive Buying

The derivatives market has also flashed bullish signals. Over the past 24 hours, BTC recorded $24.28 million in short liquidations versus $17.16 million in long liquidations, alongside a 65% surge in trading volume to $149.47 billion.

Options volume soared 128% to $9.43 billion, while the taker buy/sell ratio hit a monthly high of 1.16, a sign that buyers are aggressively absorbing supply.

Positive funding rates further indicate traders’ willingness to pay premiums to hold long positions, suggesting confidence without excessive leverage risk. The NVT Golden Cross, a valuation-to-transaction metric, has dropped sharply, a pattern that has historically preceded strong rallies.

With resistance at $122,190 and support near $115,892, market watchers say a breakout above the former could trigger a retest of $124,457.

Cover image from ChatGPT, BTCUSD chart from