Bitcoin Rally Fuels Debate Over Short Squeeze vs Spot Demand

Nicola Sondergaard, a research analyst at Nansen, says that Bitcoin's recent rally beyond $73K is not just fueled by short squeezes. According to him, spot demand and exchange-traded fund (ETF) inflows are providing the underlying support for the move.

A short squeeze occurs when a rapid price increase forces traders who bet against an asset to buy back positions, amplifying upward momentum. However, Sondergaard emphasized that this mechanism did not create the rally. Instead, it compounded buying pressure that was already building from spot purchases and ETF inflows.

Data from Nansen indicates that spot buying has been strengthening, with ETF demand also contributing significantly. This distinction is critical for traders assessing the sustainability of the move.

With most of the short squeeze now largely complete, the continuation of the uptrend depends on sustained spot buying, according to Sondergaard. He identified $70,000 as a critical support level. If Bitcoin holds above this threshold, positive momentum could persist.