Bitcoin recorded a sharp 24.6% increase over five days in August, yet this surge was not fueled by new bullish positions. According to a joint report by blockchain analytics firm Glassnode and crypto exchange Bybit, the rally was mainly powered by the rapid unwinding of short positions.
Short squeeze drives Bitcoin price surge
Glassnode and Bybit analyzed data up to August 23 from four major crypto-native trading venues, excluding CME. During the period, Bitcoin’s price climbed dramatically while coin-denominated open interest—a measure of active leveraged positions—fell by 12.6%.
This pattern, the report stated, is indicative of traders closing short positions under pressure rather than building new long positions. In total, open interest amounting to 64,000 BTC was eliminated, and shorts contributed 89% of all liquidated positions in terms of value.
Options data confirmed the trend, with puts—contracts bought to hedge against price drops—having been consistently priced higher than calls for 361 days. That streak ended in a single session, signaling a remarkable shift in market sentiment as downside bets were rapidly reversed.
Options and futures reflect one-off event
Bybit’s proprietary volatility index moved four times its usual daily range during the rally, underscoring the sudden intensity in price action. The front end of the Bitcoin futures curve repriced sharply while longer-dated contracts remained largely unchanged, supporting the interpretation that traders viewed the move as an isolated event rather than the start of a broader market turnaround.
Glassnode clarified that its analysis focused solely on cryptocurrency-native venues. This means the findings predominantly portray market structure on platforms tailored to digital asset trading and do not capture every trading environment where Bitcoin is available.
Mini dictionary: Glassnode is a blockchain analytics firm offering on-chain and market intelligence, while Bybit is a cryptocurrency exchange platform known for derivatives trading catering to retail and institutional investors.
Market action extends into new rally
The trend observed in August has resurfaced, as Bitcoin recently surpassed $80,000 amid fresh market volatility. This move followed the Federal Reserve’s latest interest rate decision and a dovish outlook from policymakers.
The resulting turbulence triggered another wave of liquidations, with more than $230 million in Bitcoin shorts and over $445 million across the entire digital asset market closed out within a single session, according to CoinGlass data.
| Period | Bitcoin Price Change | Open Interest Change | Total Bitcoin Shorts Liquidated | Total Market Liquidations |
|---|---|---|---|---|
| 5 days in August | +24.6% | -12.6% | 64,000 BTC | — |
| Recent rally | Back above $80,000 | — | $230 million (BTC) | $445 million (total) |
The report highlighted ongoing uncertainty about whether August’s market repricing signals the start of a lasting trend shift. If sustained, the market would likely see call options remain in demand and the short end of the futures curve stay strong. However, if downside protection returns to prominence and funding rates fade, it might signal a temporary event that the market has already absorbed.
A durable change will be evident if bullish option demand persists and front-month futures hold firm. Otherwise, renewed interest in puts and weakening funding could suggest the rally was an isolated occurrence.
