Bitcoin's Sharpest Rally in Two Years Ran Almost Entirely on Short Liquidations
A joint Glassnode-Bybit report finds Bitcoin's 24.6% gain across five days in August was driven largely by short liquidations rather than new long positions, with coin-denominated open interest falling 12.6%. The analysis, using data through the settled close of August 23 from four crypto-native venues (excluding CME), shows shorts accounted for 89% of every liquidated dollar during the move.
Why It Matters
If a rally is powered mainly by forced short-covering rather than fresh buying, it may be more vulnerable to reversal; the report highlights that market structure and derivative flows, not outright new bullish conviction, produced one of Bitcoin's most violent rallies in two years. Determining whether the repricing endures depends on how options skew and futures curve dynamics evolve going forward.
Key Facts
- Price move: Bitcoin rose 24.6% over five days in August
- Open interest: Coin-denominated open interest fell 12.6% during the same period
- Short contribution to liquidations: Short positions supplied 89% of every liquidated dollar
- BTC closed out: Approximately 64,000 BTC of open interest was closed out
- Options skew: Puts had priced richer than calls for 361 consecutive days until a single session flipped that run
A Glassnode and Bybit collaboration analyzing data through the settled close of August 23 concludes that Bitcoin’s sharp five-day advance in August was driven predominantly by forced short-covering rather than fresh leveraged long bets. During the five-day stretch Bitcoin climbed 24.6% while coin-denominated open interest — a proxy for active leveraged exposure — declined 12.6%, indicating that leveraged positions were being removed as prices rose. The report quantifies the scale: roughly 64,000 BTC of open interest was closed out, and short positions accounted for 89% of every dollar liquidated in that period.
Derivative markets displayed matching signals. The options market had reflected sustained downside protection demand — puts priced richer than calls for 361 consecutive days — until one session reversed that premium, suggesting a rapid one-off repricing of downside risk. On the futures side, Bybit’s volatility index moved to about four times its normal daily range in a single session, and the near end of the futures curve repriced sharply while longer-dated contracts showed little movement, which the report interprets as the market treating the spike as an isolated event rather than a durable regime shift.
The authors caution about scope and interpretation: the dataset covers four crypto-native venues and excludes CME, so the findings describe the crypto-native derivative market rather than the entire Bitcoin trading universe. They also note that the dynamic has recurred; after the Federal Reserve’s policy signal later in the month, Bitcoin traded back above $80,000 and another squeeze liquidated over $230 million in Bitcoin shorts (and more than $445 million across the market) in a single session, with CoinGlass reporting roughly $529 million in total 24-hour liquidations, again primarily from shorts.
The central unanswered question the report raises is whether the August repricing will persist. A lasting regime change would be visible as sustained call-bid skew and a firm front of the futures curve. Conversely, a reappearance of put premium together with waning funding pressures would suggest the move was an event the market absorbed rather than a structural shift in sentiment.
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