Bitcoin crushed the shorts on its way to $87K: what happens when that fuel runs out
Bitcoin’s explosive move toward $87,000 crushed traders betting against the cryptocurrency, but Tuesday’s pullback is setting up the rally's next test.
BTC pushed towards $87,300 on Monday before retreating towards $85,800 on Tuesday, after breaking through resistance around $82,000.
The move forced hundreds of millions in bearish positions to close, creating automatic buy orders that accelerated the advance.
But forced buying is temporary. With leverage rebuilding even as shorts were liquidated, Bitcoin now needs spot investors and ETF flows to prove buyers still exist once the squeeze has run its course.
Shorts helped Bitcoin reach $87K, but that fuel is temporary
CoinGlass data cited by CoinDesk showed $648 million of bearish crypto positions were liquidated as Bitcoin first pushed through $85,000, including $278 million tied to Bitcoin.
Later in the session, bearish liquidations climbed further as BTC moved above $87,000.
“Bitcoin up 5% this morning due to short perpetual futures contracts being liquidated,” Jim Ferraioli, head of crypto research at Charles Schwab, told CoinDesk.
The mechanics explain the speed. When a leveraged short reaches its liquidation level, the exchange closes it by buying the asset.
That buying pushes Bitcoin higher, which can force the next layer of bearish positions to close.
It is powerful, but self-limiting, as once enough shorts have been cleared, that automatic demand disappears.
Monday’s acceleration therefore revealed plenty about bearish positioning, but less about how many investors voluntarily want Bitcoin near $87,000.
Leverage increased even while shorts were being wiped out
The bigger warning came from beneath the price.
CoinDesk reported that aggregate crypto open interest rose 7.59% to $156 billion during the squeeze, despite the wave of forced closures.
That suggests traders were replacing liquidated positions with fresh leverage rather than stepping away.
Nansen senior research analyst Nicolai Sondergaard told crypto.news that Bitcoin’s move looked like a combination of renewed ETF demand and a large short squeeze.
“The important distinction is that price has turned bullish faster than positioning has,” he said.
That matters because a derivatives-led rally can become fragile if leverage expands faster than spot demand.
There are signs of genuine buying. US spot Bitcoin ETFs attracted about $433 million on Friday, according to data cited by CoinDesk, reversing much of the heavy outflows earlier in the week.
The next leg therefore needs ETF and spot demand to carry more of the load. If those flows weaken while open interest stays elevated, the same leverage that accelerated the rally could amplify a reversal.
One technical signal argues the move may be broader
The bullish counterargument is that Monday’s squeeze arrived after a longer-term technical shift.
Bitcoin closed last week above its 50-week moving average for the first time in 45 weeks.
Galaxy Digital research head Alex Thorn said in research highlighted by Unchained that reclaiming the level has historically provided strong confirmation that bear-market lows are in.
Galaxy’s historical work found that in four of the five completed Bitcoin bear markets that lost the 50-week average, the first successful weekly reclaim after the cycle low was not followed by another lower low. The 2021-22 cycle was the exception.
That does not guarantee the latest breakout will hold. But it suggests the short squeeze may have accelerated a broader change in market structure rather than created the entire rally.
Holding above the former resistance zone after forced buying fades would strengthen the case that fresh demand has taken over.