Bitcoin Surge Fueled by Short Liquidations, Not New Capital

Bitcoin's recent surge of nearly 30% in eight days has left investors wondering if this is the start of a new bull market. However, data suggests otherwise. Open interest fell while price surged, and real buying power has yet to show up.

The long/short ratio collapsed from 2.2:1 to 1:1, indicating that short liquidations fueled the rally rather than new capital. The setup before the move was a long period of tight, low-volatility compression, which left very little real sell-side supply.

Once the balance tipped, forced short covering pushed price up violently while open interest evaporated. The move only stalled when longs began taking profit and real selling appeared, both sides reducing exposure.

The current market has shifted with open interest stabilizing but buyers missing. New positions are being opened, yet real buying pressure is not keeping up. The Fear and Greed Index is back to Extreme Greed for the first time since 2024, and spot ETF inflows have turned consistently positive.