Bitcoin Rally Ends as Spot Buying and Lower Leverage Become Key to Avoiding Liquidation Cascade

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Bitcoin posted a strong 42.5% rebound in the third quarter, marking its best quarterly performance since late 2024, but Bitfinex has warned that this rally is over and that further gains must now depend on direct buying support from the spot market.

Signals from the derivatives market suggest that risks are building. A Bitfinex Alpha report noted that reducing leverage is the key to avoiding a chain of liquidations, and that a contraction in borrowing does not equate to buying interest entering the market.

Data compiled by Woofun AI shows that Bitcoin-denominated open interest has not expanded in line with rising prices, while a narrowing futures basis premium has weakened the incentive for arbitrage trades.

On the funding side, institutional buying through U.S. exchange-traded funds (IBIT.US) slowed markedly in the final week of September. Statistics from Farside Investors show that daily net inflows plunged from US$999 million on Monday, September 22, to US$134.5 million on Friday, September 26. Although net inflows were maintained for nine consecutive trading sessions, the concentration among top players was clear: BlackRock's IBIT took in US$1.16 billion for the week, followed by Fidelity's FBTC with US$701.6 million.

Calculations of the supply-demand balance reveal a sharp contraction in absorption capacity. Bitfinex estimates that as of the close on September 29, the multiple at which ETFs absorbed miners' daily new issuance had plummeted from 25.6 times to 1.8 times, while analysts believe an absorption rate of five times (about US$190 million per day) is needed to offset new supply.

On-chain holder distribution shows that 1.39 million Bitcoin is concentrated in the US$84,000 to US$86,500 range. If the price holds above US$85,000, roughly 760,000 coins would turn unrealized profitable, pushing the profitable share above 75% — historically a precursor to a long-term bull market.

Short-term technical support levels face a test from macro variables. Bitget Wallet forecasts an immediate support range of US$81,500 to US$83,000. Whether the price can stabilize there depends crucially on the path of the 10-year U.S. Treasury yield and on whether sustained ETF net outflows can be avoided before early October. This marks a pivotal moment after the end of the third-quarter rally, as the market seeks a new equilibrium between spot demand and macro liquidity.

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