- Bitcoin dropped below $116K support into a low-volume range, signaling a possible accumulation zone as buyers cautiously step back into the market.
- On-chain data shows 120K BTC was accumulated post-drop, yet resistance at $116.9K holds as recent buyers remain underwater on their positions.
- ETF outflows of 1.5K BTC and declining perpetual funding rates indicate a cooling in speculative interest and reduced short-term bullish conviction.
Bitcoin has broken below the $116,000 support level, raising questions about the strength of its recent bull run. The drop comes after the asset reached a new all-time high of $123,000 in mid-July, with prices now testing the lower range of a thinly traded zone.
Bitcoin Enters Low-Liquidity Air Gap After Support Fails
Bitcoin has entered a low-liquidity “air gap” after falling below the $116,000 threshold. This zone, between $110,000 and $116,000, contains limited historical trading volume. According to Glassnode, this makes the region structurally weak and vulnerable to additional downward pressure.
The $116,000 level had served as a key support throughout July. It was repeatedly tested, each time triggering a price rebound. However, that changed on July 31, when the market broke decisively below the zone, dragging Bitcoin to a low of $112,000.
Glassnode shared in a tweet, “#Bitcoin has broken below key support at $116K, entering a low-liquidity zone. ETF outflows, cooling funding rates, and weakening profitability signal post-ATH uncertainty.” The air gap now reflects both risk and opportunity, depending on investor response.
A large cluster of supply with a cost basis above $116,000 is now underwater, increasing the risk of capitulation if confidence erodes. The market must rebuild support within this air gap to stabilize.
On-Chain Data Shows Dip Buying, But Resistance Holds
Following the break below $116,000, on-chain activity indicates that investors bought nearly 120,000 BTC between July 31 and August 4. This was observed through changes in Entity-Adjusted UTXO Realized Price Distribution (URPD), pointing to dip-buying behavior.
After bottoming out near $112,000, Bitcoin then subsequently pushed back up above $114,000, where some opportunistic buyers may have perceived value at lower levels. However, this rally is yet to drive the price back above the former support of $116,900, which has now become resistance.
This resistance is tied to the cost basis of holders who entered the market over the last month. Until that level is reclaimed, the short-term trend remains uncertain. If demand does not return strongly, a move toward the lower edge of the gap at $110,000 remains likely.
The thin supply in this range may support accumulation over time, but current conditions suggest caution among investors as they await clearer signals of strength.
Short-Term Holder Metrics Remain Within Bullish Territory
Bitcoin is still trading above the short-term holder cost basis at $106,000. This cost basis often serves as a critical boundary between bullish and bearish market conditions. As long as Bitcoin remains above this line, the broader structure is intact.
However, the profitability of short-term holders has declined significantly. From full profitability at the peak, only 70% of their supply remains in profit following the pullback. This level historically marks the midpoint of bull phases.
While this does not yet suggest a reversal, it reflects a cooling of confidence among recent buyers. If the correction deepens, more supply could fall into loss, potentially leading to further price pressure.
Market behavior remains in a relatively neutral position. There is no major rush to exit, but buyers are also not aggressively stepping in. This balance keeps the market vulnerable to volatility in either direction.
ETF Outflows Add Sell-Side Pressure
On August 5, Bitcoin ETFs saw an outflow of 1,500 BTC. This is the largest single-day outflow since April of 2025 (according to Glassnode). While outflows associated with ETFs have tended to die down quickly, they can still have a significant impact on short-term price action.
To this point, ETF demand has supported the upward momentum in Bitcoin. While this outflow does not yet indicate a lasting shift, it reflects weakening appetite from traditional investment channels.
ETF sell-side pressure, combined with underwater positions above $116,000, adds another layer of resistance to the market. If outflows continue, it may lead to more sustained downside moves.
For now, it remains to be seen whether this is an isolated event or an early sign of reduced institutional interest.
Cooling Futures Market Reflects Reduced Bullish Sentiment
Sentiment in the futures market has shifted away from recent highs. Perpetual funding rates across all major exchanges have fallen back below the 0.1% level. This suggests traders are no longer paying large premiums for long exposure.
The downwards trend in funding rates is consistent with the lesser speculative activity and a restrained sentiment of leveraged traders. It indicates less conviction in near-term price gains, following the post-ATH correction.
Combined with ETF outflows and the inability to reclaim key resistance levels, this suggests Bitcoin is entering a phase of market reassessment. Speculators appear to be waiting for confirmation before re-entering with higher leverage.
At present, the market remains between two key levels. The prior cycle’s ATH of $110,000 provides support below, while $116,900 stands as resistance above. Movement beyond either of these levels will likely shape the next direction of the Bitcoin bull run.
