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Bitcoin (BTC) experienced a notable sell-off heading into the final week of September, dropping to around $112,000 and unsettling the crypto markets. Traders are now divided over whether the recent dip signals a retest of support near $100,000 or a temporary correction before bullish continuation.

• The recent decline liquidated over $1 billion in long positions, marking the largest single liquidation event of 2023 thus far.

• Amid rising inflation concerns, Fed Chair Jerome Powell’s upcoming speech and upcoming U.S. economic data are keeping traders vigilant over potential monetary policy shifts.

• Speculation is also mounting about a significant political announcement related to Bitcoin from the U.S. government, fueling further market anticipation and volatility.

• Meanwhile, data suggest that Bitcoin’s profitability metrics are echoing previous bull markets, hinting that a new cycle might still be on the horizon despite near-term setbacks.

Bitcoin Price Tests Support, Traders Split

After a mostly flat weekend, Bitcoin’s price action proved volatile early this week, plunging briefly below $112,000. Market data from Cointelegraph Markets Pro and TradingView confirmed the move, prompting mixed reactions among traders.

Some traders see the retest of the support level at $112,000 as a potential buying opportunity, with some optimistic about reaching new highs if key levels are reclaimed. Notable analyst Jelle expressed confidence that holding higher lows could push BTC toward $120,000 and beyond.

“Hold the higher low here, and $BTC likely pushes for $120,000 next.”

Conversely, others, like trader Captain Faibik, interpret the move as part of a broader correction. “I warned back in August that late buyers would get trapped, and since then, Bitcoin has declined 13%,” he posted on X, identifying a potential drop toward $100,000 before any sustained rally.

Liquidation data from CoinGlass highlights over $1.7 billion in forced closures within 24 hours, predominantly longs, with Bitcoin’s on-chain analytics revealing heightened vulnerability around $113,000. As Daan Crypto Trades notes, more than $2 billion in open interest at levels between $106,000 and $108,000 suggests an impending sweep of liquidity zones.

Markets Eye Federal Reserve and Political Shifts

All eyes are on the upcoming release of September’s Personal Consumption Expenditures (PCE) index, a key measure of inflation, as traders seek clues on possible Fed rate cuts. Chair Jerome Powell’s speech at the Greater Providence Chamber of Commerce will also be scrutinized for hints on subsequent monetary policy moves.

The CME FedWatch Tool indicates a high probability of a 0.25% rate cut at the October 29 Federal Open Market Committee (FOMC) meeting, although some analysts warn inflation pressures and weak labor data could complicate the outlook.

Adding to market speculation are rumors of a major political announcement, with some suggesting the U.S. might unveil plans for a strategic Bitcoin reserve. This idea, once met with skepticism, remains a topic of discussion following recent high-level meetings involving crypto industry leaders.

Market Sentiment and Long-Term Outlook

Despite short-term turbulence, on-chain analytics from CryptoQuant and Glassnode show signs of a market in the “pre-euphoria” stage, with Bitcoin’s Market Value to Realized Value (MVRV) metrics diverging as long-term holders realize profits. Historically, such divergence has preceded the parabolic top of Bitcoin cycles, suggesting the potential for further upside once current consolidation concludes.

While the immediate outlook remains uncertain, analysts agree that a fresh bull cycle could still be on the horizon, especially as macroeconomic uncertainties continue to influence crypto markets. Investors remain watchful for the next major move amid ongoing debates over crypto regulation, inflation, and geopolitical developments.

This analysis reflects ongoing market dynamics and does not constitute financial advice. As always, traders should perform their own research and consider risks carefully before engaging in crypto investments.