Bearish Sentiment Weighs on Bitcoin as Short Squeeze Fades

A significant short squeeze in August left Bitcoin (BTC) traders scrambling to cover their positions, resulting in over $6.55 billion in liquidations.

The surge in price triggered a wave of bearish traders liquidating their shorts, with two-thirds of total liquidations coming from this category.

However, data suggests that the recent rally may not be driven by fresh spot demand, but rather by the unwinding of leveraged positions and short squeezes.

A look at on-chain data reveals a trend of smaller holders accumulating Bitcoin as it dipped below $67k, while larger holders were among the first to cash out when the market turned risk-off or failed to break key resistance.

This trend may already be starting to weigh on investors, with sentiment turning bearish and the setup looking less convincing for a breakout past resistance.