Bitcoin Surges Above $85,000 After Wave of Short Liquidations

Bitcoin's price surged above $85,000 in the past 24 hours, marking its strongest advance since January. The cryptocurrency gained over 5% to reach $85,193, extending its rally over the past 35 days to nearly 29%. This sharp increase caught bearish traders off guard, with CoinGlass data showing that about $750.5 million of leveraged crypto positions were liquidated in a single day, with $648 million coming from shorts.

The forced unwinding was accompanied by a sharp increase in aggressive buying across Bitcoin derivatives markets. CryptoQuant's data showed net taker volume on Binance jumped from around $11 million to $618 million within an hour as European trading opened. This shift partly attributed to improving geopolitical sentiment, as investors responded positively to signs of potential diplomatic progress between the US and Iran.

Bitcoin open interest stands at about $28.83 billion, close to its May record, leaving a large pool of derivatives positions vulnerable to further price swings. If prices rise, additional short sellers could be forced to cover, but if Bitcoin loses momentum, leveraged long positions could unwind rapidly, turning the same mechanics that accelerated the rally into selling pressure.

The move above $85,000 has also pushed Bitcoin through technical levels traders have watched for months as evidence that the downturn is ending. Galaxy Digital's Head of Firmwide Research, Alex Thorn, noted that previous recoveries of the 50-week moving average often provided strong confirmation that Bitcoin had already established its bear-market low.

However, the breakout's strength has yet to produce a comparable increase in underlying network activity. Santiment said new and active Bitcoin addresses remained near their median levels between July 24 and Sept. 20, even as the price broke higher. Derivatives activity has been much stronger, with open interest jumping about 9% on Sept. 18 and remaining elevated.