Bitcoin Breakout Tests Historical Significance Amid Short Squeeze Fears

Bitcoin's recent breakout above $87,000 has sparked excitement among investors, but history comes with a catch. According to Galaxy Research, Bitcoin has reclaimed the 50-week moving average on a weekly close in 13 prior instances, and 11 of those reclaims held without a lower bear-market low.

However, the sample size is limited as it repeatedly draws from the same handful of market cycles, which may not be representative of current conditions. A senior research analyst at Nansen noted that large Bitcoin traders on Hyperliquid remained net short even as price broke higher, suggesting that the rally might be driven by renewed ETF demand and a short squeeze.

Galaxy's analysis suggests that if spot taker flow turns decisively positive, ETF flows return to positive, and leverage rises without overheating, it could indicate a durable reversal. However, if ETF flows stay negative while exchange inflows continue and leverage builds faster than spot demand can support, the rally might turn into a short squeeze.

Nicolai Sondergaard, senior research analyst at Nansen, identified two key tests for Bitcoin's breakout: sustained spot buying and ETF inflows returning to positive. If these conditions are met, he expects a retest and clearance of $87,400, opening the way toward $90,000 and eventually $92,000.