🚀Hi dear friends! Let's analyze the Liquidation Heatmap for Bitcoin (BTC/USD)

This type of chart is a powerful tool for traders looking to understand where large leveraged positions might get liquidated, potentially triggering sharp price movements due to volatility. By analyzing the Liquidation Heatmap, we can identify high-density zones that represent a concentration of liquidation orders.

The image above shows the Liquidation Heatmap for Bitcoin (BTC/USD) on Binance in the 1-week time frame for BTC/USDT perpetual futures.

This chart is a useful tool for traders as it shows the concentration of liquidation orders at different price levels, which can be a good indicator of where large leveraged positions might get liquidated, potentially triggering sharper price movements due to increased volatility.

Let's break down the chart and discuss its implications for traders.

Vertical Axis: Price of Bitcoin (USDT)

The vertical axis ranges from approximately 78,700 to 92,141 USDT.

Horizontal Axis: Time Frame

The chart covers several days, with each day marked on the horizontal axis.

Colors: Density of Liquidation Orders

Dark purple indicates low density of orders.

Green and yellow indicate high density of liquidation orders, meaning areas where many leveraged positions could be liquidated if the price reaches those levels.

Price Trends

Bitcoin's price started the period at around 87,000 USDT and encountered a resistance zone between 87,000 and 91,000 USDT.

The price then began a sharp decline, which appears to have bottomed out at a strong support level near 78,700 USDT, where there was a large spike in liquidation volume.

At the current moment, the price seems to be around 79,000 USDT, suggesting a consolidation phase or a potential recovery attempt after the steep drop.

Liquidation Zones

High Density of Liquidations (Green/Yellow):

There’s a significant concentration of liquidation orders between 87,000 and 91,000 USDT, indicating that many leveraged traders (likely long positions) were liquidated during the drop, as the price crossed this zone.

Another key zone is between 80,000 and 84,000 USDT, which was tested during the recent decline. This area still shows some density of orders, suggesting more liquidations could occur if the price continues to fall or recovers quickly.

Low Density of Liquidations (Purple):

Below 80,000 USDT, there are fewer liquidation orders, indicating that selling pressure from liquidations has likely subsided in this price range. This could act as temporary support.

Market Behavior

The drop from 91,000 to 78,700 USDT was accompanied by an increase in liquidation density, suggesting that leveraged long positions were forced to close, amplifying the downward movement (a classic long squeeze).

The liquidation volume at the bottom of the chart shows spikes during the decline, confirming that large positions were liquidated. For example, the massive liquidation at the bottom of the chart around 79,000 USDT signals a significant liquidation event at that price level.

Trends and Predictions

Short Term:

The current price (79,000 USDT) is near a low-density liquidation zone, which may indicate that selling pressure from liquidations has decreased. This could allow for consolidation or a recovery attempt.

However, the zone between 80,000 and 84,000 USDT still has some order density. If the price rises quickly to this range, there could be a new wave of liquidations of short positions, potentially pushing the price higher.

Conversely, if the price falls below 78,700 USDT, there may be little significant support until lower levels (like 75,000 USDT), as there are few liquidation orders to absorb selling pressure.

Medium Term:

The sharp decline from 91,000 to 78,700 USDT suggests the market may be in a corrective phase after a rally. To confirm a bullish trend reversal, the price needs to recover and hold above 84,000 USDT, where a liquidation zone could act as resistance.

If the price fails to recover and continues to fall, the next major psychological level would be 75,000 USDT, which might attract buyers looking for a bottom.

Tips for Investors Looking to Profit From Volatility

Use Liquidation Zones as Price Targets:

Traders seeking volatility can use high-density liquidation zones as entry and exit targets. For example:

Short Positions: If the price approaches 84,000 USDT and shows signs of rejection (a reversal candle or increased selling volume), it could be an opportunity to open a short position, as liquidations of long positions might push the price down again.

Long Positions: If the price drops below 78,700 USDT and shows signs of support (a double bottom or increased buying volume), it could be a chance to open a long position, as the lack of liquidation orders below this level might allow for a recovery.

Manage Risk with Stop-Loss:

Volatility in high-density liquidation