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

Bitcoin extended a recent rally to an eight-month high near $86,000 after piercing a resistance level around $82,000 that had capped prices since August. The break above that level forced a wave of short-position liquidations — roughly $750 million worth, according to CoinGlass — which added upward pressure as exchanges executed buy orders to close bearish bets. At the same time, traders piled back into leveraged positions: futures open interest has risen by about $2 billion since the breakout, per Coinalyze, indicating increasing exposure in derivatives markets even as the short book was being squeezed. That build in leverage has drawn attention from market participants who monitor positioning as a gauge of how sustained the move might be. Spot flows and ETF activity have been uneven around the breakout. Data from Farside Investors showed combined U.S. spot bitcoin ETF outflows of $746 million on Tuesday and Wednesday following the Clarity Act cloture vote failure in the Senate and a Federal Reserve rate hike, but flows reversed later in the week with $160 million on Thursday and $433 million on Friday. ETF investors’ average cost basis reportedly sits near $82,225, marking a recent milestone where ETF holders on average are back in profit. Analysts point to incremental targets above current levels — $87,000, $90,000 and about $92,000 — but several traders urged caution. The 50-week moving average has been reclaimed, a signal some use to mark trend shifts, yet firms including Nansen and Wintermute emphasize that price has moved faster than broader market positioning. Without sustained spot and ETF demand, they said, the rally risks being a leverage-driven advance that could reverse if yields rise or another shock hits markets. Historical precedents of rapid deleveraging were noted, including the roughly $19 billion liquidation cascade on Oct. 10, underscoring how quickly leveraged markets can unwind.