Bitcoin Price Determination: The Relevance of This Level in Triggering the Next Bull Run
Bitcoin, the world's leading cryptocurrency, has been experiencing a series of interesting developments in recent times. Despite a cooling down of speculative activity, investor confidence in the digital asset remains robust.
On the 8th of August alone, Bitcoin saw steady spot exchange outflows to the tune of $113.32 million. This ongoing negative netflow trend suggests that investors prefer holding rather than trading, even as prices consolidate. The lower Funding Rates may point to a market breather rather than sustained bullish conviction. Intriguingly, Bitcoin's derivatives market has experienced a shift, with Perp Funding Rates falling below 0.1%. This drop in funding rates indicates a cooling in aggressive leveraged long positions and growing trader caution.
The Network Value to Metcalfe (NVM) ratio dropped sharply by 18.07%, indicating a weakening network valuation despite price growth. This divergence implies Bitcoin may be overvalued from a network fundamentals perspective. However, a closer look reveals that new and active address counts have risen over the past week, which could provide a longer-term buffer against valuation concerns.
Bitcoin's recent pullback in Funding Rates and NVM ratio highlights cooling speculation and network overvaluation. Yet, Bitcoin is nearing all-time highs around $120,000, demonstrating strong price resilience and ongoing demand. This strong performance attracts both retail and institutional investors.
Robust institutional participation, evidenced by high daily trading volumes (over $60 billion) and a large market capitalization (~$2.4 trillion), shows that Bitcoin price discovery is increasingly driven by institutional investors rather than pure speculation. Supportive regulatory developments, such as the 2025 GENIUS Act and the establishment of a Strategic Bitcoin Reserve, provide legal clarity and government endorsement, fostering confidence in Bitcoin's future.
Macroeconomic tailwinds, notably the near-certain Federal Reserve rate cut expected in September 2025, are likely to boost risk assets including Bitcoin. Lower interest rates reduce opportunity cost, and inflation concerns augment demand for digital assets as a hedge. Despite some traders showing less confidence near certain price levels and outflows from spot Bitcoin ETFs, the broader derivatives market data does not indicate a collapse in the 2025 bull run, implying that experienced investors remain committed.
The Binance liquidation heatmap reveals dense liquidation layers between $116,000 and $118,000, creating a critical resistance band for Bitcoin. These liquidation clusters are highlighted in bright yellow and green, marking areas where aggressive leverage positions are most likely to be liquidated. The $116K-$118K liquidation zone remains a critical hurdle for Bitcoin, as a breakthrough could trigger renewed momentum, while a rejection could reinforce short-term caution.
In conclusion, investor confidence in Bitcoin is maintained by strong price performance, institutional adoption, regulatory progress, and favorable macroeconomic conditions, even as short-term speculative activity and Funding Rates cool.
- Despite the cooling down of speculative activity and the dropping NVM ratio, investor confidence in Bitcoin remains robust, as evidenced by high daily trading volumes and a large market capitalization.
- The ongoing negative netflow trend and the drop in Perp Funding Rates indicates a cooling in aggressive leveraged long positions, suggesting that investors prefer holding Bitcoin over trading, even as prices consolidate.
- Investments in Bitcoin are not only driven by retail investors, but also by institutions, as demonstrated by the growing participation of institutional investors and supportive regulatory developments like the 2025 GENIUS Act.
- The Binance liquidation heatmap identifies a critical resistance band for Bitcoin between $116,000 and $118,000, where dense liquidation layers exist, indicating areas where aggressive leverage positions are most likely to be liquidated.
