Bitcoin could test $90,000 after shorts get squeezed, but traders warn leverage is building

Bitcoin pushed to a fresh eight-month high of $86,000 on Monday, extending a rally that forced bearish traders out of their short positions and drew fresh leverage bets back in.

Roughly $750 million in bearish crypto derivative positions were liquidated as bitcoin cleared $82,000, a level that capped prices since August, CoinGlass data shows. When short positions are liquidated, exchanges execute buy orders to close them, adding fuel to an already upward market.

“Bitcoin up 5% this morning due to short perpetual futures contracts being liquidated,” Schwab’s head of crypto research Jim Ferraioli told CoinDesk.

Meanwhile, futures open interest (the value of outstanding derivatives bets) rose even faster than bitcoin's price.

Since the breakout, about $2 billion in new leveraged exposure has been added, according to Coinalyze data, suggesting traders are pacing fresh bets even as shorts got wiped out.

While the rally has been fueled by a mix of renewed ETF demand and short covering, crypto-native positioning has been slower to shift from bearish to bullish, according to crypto analytics firm Nansen’s senior research analyst, Nicolai Sondergaard.

U.S. spot bitcoin ETFs saw a combined $746 million of outflows on Tuesday and Wednesday as the Clarity Act cloture vote failed in the Senate and the Fed hiked rates, according to data by Farside Investors. Then, flows quickly reversed, taking in $160 million on Thursday and $433 million on Friday, the strongest inflow day of the week.

“The important distinction is that price has turned bullish faster than positioning has,” he said.

U.S. spot bitcoin ETFs saw a combined $746 million of outflows on Tuesday and Wednesday as the Clarity Act cloture vote failed in the Senate and the Fed hiked rates. Then, flows reversed just as fast, taking in $160 million on Thursday and $433 million on Friday, the strongest inflow day of the week. Monday’s flow data will come later and will also be something traders watch in the wake of the rally.

Additionally, bitcoin’s rally on Monday also triggered a milestone for holders of bitcoin exchange-traded funds (ETFs), with the average cost basis for U.S. BTC ETF buyers at $82,225 representing the first time in a while that ETF investors are making profits.

Bitcoin may test $90,000

The move through $82,000 is getting attention because that level had already stopped bitcoin once. An attempt to break through in May failed, and the price slid below $60,000 in June.