Bitcoin in limbo? – Why investor psychology hints at $100K BTC retest

Key Takeaways

Is BTC’s latest dip a healthy reset, or something deeper?

BTC’s on-chain data shows conviction holding, but stretched leverage and fading sentiment hint this may be the early phase of a broader unwind.

What’s driving the current Bitcoin cycle?

The cycle has turned psychological, with market flows and positioning dictating price more than technical structure or macro catalysts.

The market uncertainty has Bitcoin [BTC] investors on edge. 

In less than a week, the TOTAL crypto market cap has shed roughly $300 billion, dropping to around $3.5 trillion. Bitcoin accounted for nearly 53% of the drawdown, confirming that this was a BTC-led deleveraging event.

While momentum hasn’t turned fully bearish, the timing of recent market moves has surprised traders. Despite favorable macro conditions, sharp volatility led to over $1 billion in liquidations, shaking investor confidence across the board.

Source: CoinGlass

Looking closer, longs bore the brunt of the move.

Around $954 million in long positions were wiped out, signaling a classic bull trap as the market moved against macro expectations. This trapped longs and triggered a 1.6% dip, pushing BTC below the $110k floor.

And yet, on-chain data tells a steadier story. 

Unrealized losses account for 1.3% of BTC’s market cap, at press time, which is well below the 5% level that typically signals early capitulation.

That shows holder’s conviction is still intact despite the flush. Given the context, does this setup point to a healthy reset?

The BTC cycle shifts: Mindset over mechanics

The Fear and Greed index shows a clear psychological shift in BTC’s cycle.

Ahead of the FOMC, the index climbed nearly 10 points to 42, pulling back into the neutral zone. The market was clearly leaning dovish, with BTC Open Interest (OI) pushing to a two-week high of $74 billion.

But the move quickly unraveled. The market faded the bounce, sending the index back into fear at 31 as OI contracted about 4.05% to $71 billion. In short, sentiment turned defensive, with traders de-risking into volatility.

Source: CryptoQuant

And yet, Bitcoin’s OI–Price Divergence (%) metric has flipped red to 10.35%. This signals that leverage remains stretched, even as price action cools, with BTC now being driven by position flows rather than spot demand.

In fact, the metric has climbed to its highest level since mid-August. 

Back then, BTC dropped to $107k after three red weekly closes off its $123k ATH. With a similar setup forming, a breakdown can’t be ruled out, with analysts eyeing the $100k–$105k zone as the next correction pocket. 

In this context, Bitcoin’s cycle appears sentiment-driven, rather than structural. Unless momentum flips, BTC risks a deeper flush, with the current dip resembling the early phase of a broader unwind rather than a healthy reset.