Bitcoin has pushed into an eight-month high above $86,000, with a wave of short liquidations helping accelerate the move. The rally has put $90,000 back within sight, but traders are watching a less comfortable development beneath the surface: leverage is building almost as quickly as prices are rising.
Bitcoin broke above $82,000 on Monday, a level that had capped several previous attempts higher. The move triggered roughly $750 million in bearish crypto derivative positions to be liquidated, according to CoinGlass data. When short positions are liquidated, exchanges effectively buy back Bitcoin to close those trades, creating additional demand and potentially pushing prices higher.
“Bitcoin up 5% this morning due to short perpetual futures contracts being liquidated,” Jim Ferraioli, Schwab’s head of crypto research, told CoinDesk.
That short squeeze has become an important part of the latest rally. But it also means the market needs to prove that there is enough underlying demand to keep prices moving once forced buying fades.
Bitcoin (BTC) Price Performance Today (Source: CoinMarketCap)
Leverage is returning
One of the clearest warning signs is the jump in futures open interest, which tracks the value of outstanding derivative positions.
Since Bitcoin broke higher, roughly $2 billion in new leveraged exposure has entered the market, according to Coinalyze data. Open interest has therefore increased even as traders who were betting against Bitcoin were forced out.
That distinction matters. A rally supported by fresh spot demand is different from one increasingly driven by traders opening leveraged positions and chasing momentum.
Nansen senior research analyst Nicolai Sondergaard said the key difference in the current market is that price has turned bullish faster than positioning.
The ETF market also shows a mixed picture. U.S. spot Bitcoin ETFs recorded a combined $746 million in outflows on Tuesday and Wednesday amid renewed macro and regulatory uncertainty. Flows then reversed, with $160 million entering on Thursday and another $433 million on Friday.
That reversal is encouraging for bulls, but traders will be watching whether inflows remain strong enough to support the market after the initial breakout.
Bitcoin’s average cost basis among U.S. spot ETF buyers has also moved to around $82,225, meaning ETF investors as a group have moved back into profit as the cryptocurrency climbed above that level.
Bitcoin ETF Flow (Source: Fairside Investors)
Why $87,000 and $90,000 matter
The break above $82,000 is significant because Bitcoin had previously struggled around the same area. An earlier attempt to break higher in May failed, eventually followed by a decline below $60,000 in June.
Now, traders are looking at $87,000 as the next important level.
Sondergaard identified $87,000 as a key area to watch, followed by the psychological $90,000 threshold and then roughly $92,000. Wintermute OTC trader Jasper De Maere also sees a test of $90,000 as possible if the current momentum continues.
Bitcoin has also reclaimed its 50-week moving average, a longer-term technical level followed by some market participants. De Maere noted that the moving average had acted as resistance during previous bear-market periods. Reclaiming it could therefore provide additional confirmation for traders who are looking for evidence that Bitcoin’s June low may have marked a broader turning point.
The rally has also arrived despite a difficult macro backdrop. Last week’s failed attempt to advance the Clarity Act in the Senate and the Federal Reserve’s rate increase, accompanied by relatively hawkish commentary, had created additional uncertainty for risk assets.
Bitcoin has nevertheless continued higher.
The rally still needs spot demand
The biggest question now is whether the spot market can catch up with derivatives.
“If the ETF and spot flows don’t follow, this breakout could turn into a leverage-driven move,” Sondergaard said, warning that higher government bond yields or another geopolitical shock could quickly reverse the move.
That is the central risk facing Bitcoin after a short squeeze. Forced buying can push prices sharply higher, but it does not necessarily represent lasting demand. If traders continue opening leveraged long positions while spot buyers remain cautious, the market can become increasingly vulnerable to a sudden liquidation cascade.
Crypto markets have seen how quickly that dynamic can unravel. A previous liquidation event wiped out billions of dollars in leveraged positions as falling prices triggered forced selling, which then intensified the decline.
For now, traders are watching several indicators closely. De Maere pointed to ETF flows over the coming days, excessive positioning in perpetual futures, funding rates and Friday’s options expiry as factors that could determine whether the rally has room to run.
Altcoins have also started moving higher alongside Bitcoin, suggesting that risk appetite is spreading beyond the largest cryptocurrency. But Ferraioli said the more important question is whether activity across smaller blockchain networks actually increases, rather than prices simply rebounding after being heavily sold.
Some traders are already describing the latest move as the beginning of a new bullish cycle. Chris Sullivan, co-portfolio manager at Hyperion Decimus, called it the first major rally of a new bull market while warning that a substantial correction could follow once the move loses momentum.
That caution is important even if Bitcoin reaches $90,000.
For now, the market has successfully broken through a major resistance zone and forced a large number of short sellers to exit. The next phase will depend less on liquidation-driven buying and more on whether genuine spot demand, ETF inflows and sustainable positioning can support the higher prices.
Bitcoin may have $90,000 in sight. Whether it can hold the gains after the short squeeze is the bigger question.
