Bitcoin Bounces Back 26% Amid Record Short Squeezes and ETF Demand

Bitcoin's price has rebounded by about 26% since its mid-August low after a short-liquidation event accelerated the recovery. The August 19 move was the largest one-day liquidation event since 2019, with most of the liquidations occurring on major centralized exchanges. According to Glassnode, the actual total of liquidations may have been higher due to the exclusion of Hyperliquid from the dataset.

The short-liquidation squeeze cleared much of the liquidation liquidity around Bitcoin, leaving a smaller pool of long-liquidation levels below the market. However, this rebound was not solely driven by forced closures, as spot demand also supported the move. US spot Bitcoin ETFs recorded $2.23 billion in net inflows over seven days, with no outflow days and their strongest weekly intake since mid-January.

Entities holding between 1,000 and 10,000 BTC reduced their balances by 50,500 BTC since June 30, while those holding more than 100,000 BTC added 59,100 BTC. This group includes exchanges, custodians, and ETF-related wallets. During the squeeze week, the custody group added 31,500 BTC, which is similar in scale to weekly ETF creations.

Every wallet-size cohort moved into net accumulation on Glassnode's 30-day trend score, marking the most persistent all-cohort buying since late 2024. However, Bitcoin now faces a tougher test as leverage has not returned at the same pace as its price. Futures open interest fell 11% in BTC terms, and perpetual funding remained near neutral before turning negative.