3 Things That Need to Happen for Bitcoin to Bounce Back

In Brief

• Bitcoin needs leverage and open interest to fully stabilize before a sustainable relief bounce can form. Exchange inflows must slow, signaling that short-term selling pressure has played out. Network activity and volatility need to normalize to confirm a shift from forced selling to organic price action.

Bitcoin is attempting to recover and stabilize around the $78,000 level after a sharp downside move that triggered widespread liquidations across derivatives markets.

The pullback followed a period of elevated leverage, with price briefly dipping below key technical levels before reclaiming intraday support.

At the time of writing, Bitcoin trades at $75,777. However, despite the volatility, on-chain and derivatives data suggest that leverage has been flushed and positioning has reset.

1) Leverage Needs to Fully Reset

The first condition is a complete unwind of excess leverage. Recent data shows open interest declining across major venues, confirming that the selloff was driven largely by forced liquidations.

However, a relief bounce usually does not begin while open interest is still actively falling. Instead, it tends to emerge once open interest stabilizes, signaling that forced position closures have run their course.

At that point, remaining positions are held by traders willing to absorb volatility, not by overexposed leverage.

Funding rates cooling toward neutral further support this setup. When funding compresses and stays balanced, it reduces the risk of another liquidation cascade.

BTC/USD Daily Chart

2) Selling Pressure Must Ease as Exchange Flows Normalize

The second condition is a slowdown in sell-side supply. Exchange netflow data shows that recent downside moves coincided with increased coins moving onto exchanges.

For a relief bounce to form, these inflows simply need to normalize. Moreover, when exchange inflows shrink and volatility remains elevated, it often signals that the most urgent sellers are out.

Once that pressure fades, even small spot demand can have an outsized impact on price. Especially in a post-liquidation environment where order books are thinner.

3) Network Activity Needs to Stabilize as Volatility Cools

The final condition is on-chain stabilization. Active address data shows participation remains elevated but uneven, reflecting uncertainty.

A relief bounce tends to occur when volatility cools and network activity levels out. Indicating that users are transacting by choice and not reacting to price stress.

Therefore, this shift allows price discovery to reflect actual demand instead of forced behavior.

When combined with reduced leverage and easing sell pressure, stable network activity often acts as confirmation that the market is ready to pause its decline.

However, failure to continue holding these levels could shift selling pressure toward spot participants, opening the door for a deeper corrective leg.