Bitcoin advanced past $72,000 on Thursday, hitting its highest level since the beginning of June, driven by a record short squeeze that forced bearish traders to exit their positions. Over the past 24 hours, liquidations of leveraged crypto positions exceeded $3 billion, with shorts accounting for roughly 92% of this, compared to about $257 million on the long side. This massive liquidation event, the largest of its kind since at least 2021, propelled Bitcoin's price, with more than half of Wednesday's gain occurring within a single hour as traders were forced out of one-sided short positions. Bitcoin rose approximately 4.9% to over $72,000.
Analysts emphasize that the rally has been primarily driven by these forced unwinds and short covering, not by fresh capital inflows or new long positions. Adam McCarthy, a researcher at crypto trading firm Lo:Tech, stated that the "fuel is spent" from the short squeeze, meaning the next phase of growth must come from genuine buying rather than further squeezes. He noted that the market has largely cleared its short base and nothing has replaced it, suggesting the initial impetus for the price surge cannot be repeated.
The sustainability of this rally hinges on the emergence of real spot demand and persistent ETF inflows. The average US Bitcoin ETF cost basis is estimated at about $82,465, with BlackRock's IBIT around $82,206 and Fidelity's FBTC at about $73,447, all above the current market price. This creates a potential resistance zone as many ETF holders are underwater and may sell to break even. Jasper De Maere, an OTC trader at Wintermute, also highlighted that the move was "squeeze-driven" and its holding depends on spot flow and sustained ETF inflows. The absence of elevated funding rates suggests that the typical leverage build-up following such a squeeze has not yet occurred.
Macro conditions, including Treasury buyback plans lowering yields and the dollar, also contributed to the improved sentiment. Upcoming catalysts include the Jackson Hole symposium on August 27-29, Kevin Warsh's debut as chair, and the confirmation of spot flows. Ishmael Asad, a Bitwise Research Analyst, viewed the rally as the strongest indication yet that Bitcoin has bottomed, attributing it to expanded Treasury bond buybacks, the SEC's proposed Regulation Crypto Assets framework, and the White House crypto summit. However, he cautioned against expecting the rally to continue at the same pace and noted that additional catalysts would be required for a sustained bull market.
