Bitcoin's August Surge Was Short Squeeze, Not Bull Run

The August surge in Bitcoin's price was not driven by optimistic buying, but rather by the unwinding of bearish bets. A joint analysis from blockchain intelligence firm Glassnode and derivatives exchange Bybit found that the 24.6% price increase over five days was fueled almost entirely by short covering.

The report examined data through August 23 and discovered that coin-denominated open interest fell by 12.6% during the price spike, which is a classic signature of a short squeeze. This occurred when traders who had bet against Bitcoin were forced to buy it back to close their positions, driving the price higher in a self-reinforcing loop.

Roughly 64,000 BTC worth of open interest was wiped out, with short positions accounting for 89% of all liquidated value during that stretch. The options market also corroborated this finding, as put options had been priced at a premium to call options for 361 consecutive days until the sudden repricing of risk.

The analysis carries important caveats, as it only examines four crypto-native options venues and excludes CME. However, the dynamic identified in August has not faded, with Bitcoin recently reclaiming the $80,000 level after a dovish outlook from policymakers triggered another wave of forced liquidations.