Bitcoin extended its robust rebound on Thursday, climbing further beyond the $72,000 threshold. However, following the record-breaking short squeeze that fueled this rapid ascent, market data indicates that fresh leveraged long positions have yet to enter in significant volume, suggesting that the current rally remains predominantly driven by short covering. With bearish forces now largely cleared from the market, the sustainability of Bitcoin's upward trajectory will increasingly hinge on whether spot buying and exchange-traded fund (ETF) inflows can take up the baton.
According to aggregated figures from Coinglass, over the past 24 hours, more than $3 billion worth of leveraged positions across the cryptocurrency market were liquidated. Yet, even after this substantial deleveraging event, open interest in Bitcoin perpetual futures has not shown a notable recovery. This pattern indicates that the rapid price appreciation over the last two days stems more from the forced unwinding of pre-existing shorts than from investors establishing new bullish bets on a large scale.
Adam McCarthy, research head at LO:TECH, observed that from the perpetual contract market perspective, what we are currently witnessing is primarily the forced exit of one-sided short positions rather than a significant influx of new capital. He noted that no investors are currently willing to pay a noticeable premium to go long. McCarthy pointed out that the substantial accumulation of shorts previously built up in the market has now been largely cleared. Therefore, if Bitcoin is to initiate its next phase of upward movement, it will require genuine new buying pressure rather than continued reliance on short squeezes. This also implies that as the mechanical buying triggered by forced liquidations gradually diminishes, Bitcoin's ability to attract fresh investors will become the critical determinant of this rebound's durability.
Meanwhile, investors in U.S. spot Bitcoin ETFs remain, on the whole, in an underwater position. Sean Rose of Glassnode estimates that the average cost basis for U.S. Bitcoin ETF investors stands at approximately $82,465, notably higher than the current spot price. Specifically, investors in BlackRock's iShares Bitcoin Trust (IBIT.US) hold an estimated average cost of around $82,206, while those in Fidelity's Wise Origin Bitcoin Fund (FBTC.US) have an average cost of roughly $73,447. This suggests that even after the recent sharp rebound, a considerable portion of ETF investors have yet to return to their breakeven point. Unlike forced short covering, ETF inflows require investors to proactively commit new capital, making the resumption of sustained net inflows into these funds particularly crucial moving forward.
Jasper De Maere, over-the-counter trader at Wintermute, stated that this rally is primarily driven by the short squeeze, so the ability to hold onto these gains will ultimately depend on spot capital flows and the persistence of ETF inflows. In the near term, if perpetual contract open interest begins to rise again, it could recreate conditions for another squeeze, but the true signal confirming a sustained trend will still need to originate from the spot market.
Corporate buying power, another force that previously propelled Bitcoin higher, has also yet to make a pronounced comeback. Stocks of publicly listed companies holding substantial digital asset reserves remain in a relatively depressed state, hindering the restart of the "equity financing to buy Bitcoin" cycle that was previously in play. In the past, when these companies' shares traded at a high premium relative to their crypto net asset value, they could raise capital by issuing stock and then use the proceeds to purchase more Bitcoin. As the valuation premiums on these related stocks have narrowed significantly, the appeal of this financing model has diminished, thereby weakening the incremental demand for Bitcoin from the corporate sector.
Consequently, Bitcoin has now entered a more pivotal phase of this rebound. The previously accumulated shorts have been largely cleared, many ETF investors remain at a loss, and corporate buying demand has not yet strongly returned. If the price is to continue its upward path, it will increasingly rely on genuine new spot buying rather than the forced closure of leveraged positions.
In parallel, the positioning structure in the options market could amplify Bitcoin's short-term volatility. According to data from cryptocurrency exchange Deribit, open interest in Bitcoin options is currently concentrated around the $70,000 call strike and the $60,000 put strike. As the price approaches these key levels, hedging activities by market makers to adjust their risk exposure could magnify price swings in either direction.
The macroeconomic environment could also emerge as a significant factor influencing Bitcoin's next moves. Following the U.S. Treasury's recent announcement to expand its buyback program for long-dated government bonds, both Treasury yields and the U.S. dollar have retreated, improving the trading environment for risk assets, including cryptocurrencies, and serving as one of the contributing factors to this rebound. Market participants are also keeping an eye on the Jackson Hole Global Central Bank Symposium scheduled for August 27-29, which will mark the first attendance at this major event by the new Federal Reserve Chair. De Maere believes that aside from the Jackson Hole meeting, the key observation point ahead is whether spot capital flows can confirm this rally that started with a short squeeze.
Overall, after Bitcoin's breakout above $72,000, the technical picture and market sentiment have clearly improved. However, this rebound is transitioning from a phase of "forced buying by shorts" to one that requires "active buying by longs." If ETF inflows and spot buying can consistently return, the rally may evolve into a more durable upward trend. Conversely, if new capital remains slow to take over, Bitcoin could still face considerable volatility risk once the momentum from short covering fades.
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