$3 Billion Short Squeeze Unfolds as Treasury Doubles Liquidity Support Buybacks

The largest short squeeze in crypto derivatives since November 2021 occurred on August 19 and 20, 2026, resulting in over $3 billion in liquidations. The event was triggered by the US Treasury's announcement that it would double the maximum size of its liquidity support buyback operations for long-dated bonds from $2 billion to $4 billion per operation. This decision compressed yields and pushed risk assets higher, causing a violent price move in Bitcoin and Ethereum.

Bitcoin surged from an intraday low near $64,100 to a peak above $72,000, while Ethereum rose roughly 18% in 24 hours, its strongest single-day move since March 2024. The liquidation cascade ran for approximately 18 hours before stabilizing, with short positions accounting for around 92% of the total $3 billion in forced closures.

Binance absorbed approximately $518 million in liquidations, Hyperliquid roughly $513 million, and Bybit around $303 million. Bitcoin shorts accounted for about $1.37 billion of the total, while Ethereum shorts contributed roughly $1.01 billion. The remainder came from altcoin positions, with Solana, XRP, and Dogecoin among the most affected.

The bearish lean in crypto derivatives markets built over six weeks, during a period when multiple headwinds converged. Funding rates on Bitcoin perpetual futures turned negative in late July and stayed negative through mid-August, attracting more shorts and creating a self-reinforcing cycle of bearish positioning.