Bitcoin's $108K Support Test: Strategic Entry or Bearish Breakout?

Bitcoin’s current test of the $108,666 support level represents a critical inflection point in its volatile bull market. This level, coinciding with the 20-week simple moving average, has historically acted as a dynamic support zone during consolidation phases [1]. However, the interplay of technical indicators, institutional behavior, and macroeconomic forces suggests a nuanced risk-reward profile for investors.

Technical Indicators: A Mixed Signal

Bitcoin’s price has retreated to $109,889 after peaking at $113,000, with the RSI hovering near 40—a classic oversold condition that often precedes short-term bounces [1]. Yet bearish momentum persists in the MACD and Stochastic oscillator, which signal downward pressure and a potential breakdown [1]. The Bollinger Bands further reinforce this duality: BTC’s proximity to the lower band suggests a high probability of a rebound, but only if institutional buyers step in to absorb selling pressure [1].

Historical backtests of similar RSI-based strategies show a total return of 171% from 2022 to 2025, though with a maximum drawdown of 66.8%.

Gamma pressure near $111K adds another layer of complexity. Over $14.6 billion in BTC puts are concentrated in the $108K–$112K strike zone, creating a self-reinforcing sell-off risk if the price dips below $108K [2]. This is compounded by ETF outflows from major institutions like BlackRock and Fidelity, which have accelerated bearish sentiment [2].

Institutional and Macro Factors: Liquidity and Leverage

The Federal Reserve’s tightening cycle has exacerbated Bitcoin’s volatility by draining liquidity and increasing the cost of leveraged long positions [2]. This has triggered margin calls and amplified downward spirals, particularly in derivatives markets. Meanwhile, spot ETF inflows have recently reversed a long outflow streak, with $219 million in inflows recorded on August 26 [1]. This suggests that institutional and retail investors may still see value in Bitcoin’s long-term fundamentals, even as short-term headwinds persist.

Historical volatility patterns also hint at increased uncertainty. Bitcoin’s 30-day volatility dropped to 32% in early August 2025, below its one-year average of 50%, but seasonal factors—such as the “ghost month” effect—could trigger a spike as traders return from summer holidays [1]. The NVT ratio, now at 1.98, approaches the 2.2 overvaluation threshold, signaling a potential correction if the price surges above $108K [3].

Risk-Adjusted Positioning: Balancing Bullish and Bearish Scenarios

For investors, the key lies in risk-adjusted positioning. A successful defense of $108K could trigger a relief rally toward the 20-day moving average at $115,458 [1], while a breakdown may extend weakness toward $105,000 [2]. Conservative traders should wait for confirmation of support at $108K before entering long positions, with stops placed below $108,000 [1]. Aggressive traders might consider the current RSI levels as an entry point but must remain cautious due to bearish MACD signals [1].

Position sizing should account for Bitcoin’s elevated volatility, with an average true range of $3,168 [1]. Given the 74% of Bitcoin’s supply held by long-term investors [4], a deeper correction below $108K could attract accumulation at discounted prices. However, the 50-week EMA at $95K remains a critical line in the sand for the bull market’s integrity [3].

Conclusion: A Calculated Gamble

Bitcoin’s $108K support test is a microcosm of the broader bull market’s fragility. While technical indicators and institutional activity suggest a potential bounce, macroeconomic headwinds and derivatives market dynamics pose significant risks. Investors must weigh the historical success rate of this support level—three confirmations in the past two years [1]—against the likelihood of a breakdown. In a volatile market, disciplined risk management—through stop-loss orders and position sizing—remains paramount.