BTC retracement enters the late clearing stage, can the decline in the US dollar index help support a rebound?

Bitcoin has experienced the most intense correction of the year since early October. The price dropped from approximately $123,000 to $90.83, a decline of over 26%. During the same period, BTC futures open interest plummeted from $46 billion to $29 billion, a decrease of 37%. Behind these figures lies a key signal: the market is in a forced liquidation phase rather than the formation of a new bearish trend.

Open Interest Collapse Reveals Deleveraging Truth

The simultaneous decline of open interest and price is an important market signal. Usually, falling prices are accompanied by rising open interest, indicating active short-building; but the current situation is the opposite—both price and open interest are shrinking significantly, suggesting the market is filled with traders being forced to close positions.

In other words, this is not smart shorts building new positions at the bottom, but highly leveraged longs being forced to cut losses as risk increases. This is a typical deleveraging environment, with market liquidity severely constrained and volatility rising accordingly.

According to on-chain data, over 110,000 traders were liquidated in the past 24 hours, with total liquidations reaching $219 million. While this is a substantial figure, compared to genuine capitulation events (liquidations often between $500 million and $1 billion), the current clearing is still manageable. This indicates the market has not yet reached extreme panic, but long positions are being systematically wiped out.

Technical Perspective: Oversold Signals Suggest the Downtrend May Be Nearing an End

Although trend indicators remain weak, momentum indicators tell a different story.

BTC’s RSI (14) is currently at 28, entering deep oversold territory. Historically, RSI below 30 often appears at the end of strong sell-offs—usually a sign of a potential rebound. The Momentum indicator (10) reads at -8,661, confirming sellers still dominate, but the acceleration of the decline has noticeably slowed, hinting that selling pressure may be waning.

The MACD (12/26) is at -5,942, indicating an extremely negative trend, but due to its lagging nature, MACD often signals reversals later than RSI. After RSI enters oversold territory first, the market typically consolidates in a range before MACD begins to improve—this is exactly what is happening now.

Trend Structure: Price and Long-term Moving Averages Indicate Rebound Potential

Currently, BTC’s trading price is well below its key technical support levels. The 100-day simple moving average (SMA) is at $109,658, and the 100-day exponential moving average (EMA) is at $105,980. The current price is 20-28% below these averages, indicating BTC has broken below its trend bottom established over the past few months.

Such long-term divergence often reflects a market ending an over-aggressive cycle and seeking a new equilibrium around lower volatility levels. Once BTC reclaims the area near the 100-day EMA, upward momentum could shift positively. This also suggests that short-term rebound potential is considerable—if selling momentum exhausts, a move back toward the $105K resistance zone would be a natural market reaction.

The Role of the US Dollar Index Decline

It’s important to note the inverse relationship between the US Dollar Index (DXY) and BTC’s price. When the dollar weakens, dollar-denominated commodities and risk assets tend to find support.

Recently, the decline in the dollar index has created a favorable environment—weak dollar generally makes dollar-priced assets cheaper, attracting international capital back into markets. Additionally, a falling dollar index hints at easing global liquidity conditions, which often acts as a positive catalyst for risk assets like BTC.

In the context of ongoing deleveraging, technical oversold signals, and a weakening dollar, BTC’s rebound momentum is building.

Potential Bottoms and Support Levels

Based on current market structure and liquidity distribution, the following support levels are noteworthy:

Short-term support zone: $82,000–$85,000 — the recent liquidity concentration area where many forced liquidations occurred.

Medium-term support: $78,000–$80,000 — a deeper structural support zone, serving as a last line of defense if prices break below the short-term zone.

Resistance above: $92,000–$95,000 — the first key target for a rebound, with a potential second resistance level beyond.

Major resistance: around $106,000 — near the 100-day EMA, a critical level for confirming trend reversal. Only a clear break above this zone would signal a trend shift.

Outlook: Stabilization Opportunities Emerge

In summary:

Deleveraging is ongoing but has not yet reached extreme capitulation levels. The contraction of open interest, manageable liquidation amounts, and oversold technical signals all suggest the most intense decline may be over.

As momentum indicators reset and the dollar index pulls back, the probability of a short-term rebound increases. However, it’s important to emphasize that a rebound does not equate to a trend reversal—unless BTC can regain levels near the long-term moving averages, the macro trend remains weak.

The key next step is to observe whether BTC can form a bottom near current support levels. If a stable bottom can be established in the $82K–$85K range and then gradually recover toward the 100-day EMA, the true trend reversal will become clearer. Currently, we are witnessing a transition from a forced liquidation phase to a stabilization phase, but a definitive reversal will require more time and confirmation.