Bitcoin's Squeeze-Driven Rally Faces Test of Genuine Demand

Bitcoin broke past $72,000 on Thursday after a record short squeeze led to bearish traders covering their positions. The squeeze forced leveraged crypto position liquidations exceeding $3 billion in the past 24 hours, according to Coinglass.

The perpetual futures open interest has not yet rebounded sharply, indicating that the two-day rally was driven mostly by short covering. Glassnode's Sean Rose estimates the average US Bitcoin ETF cost basis at about $82,465, while BlackRock's IBIT estimated cost basis is around $82,206; Fidelity's FBTC is about $73,447.

These levels sit well above the current market price, leaving most ETF holders underwater and waiting to break even. This creates a potential resistance zone as many investors may sell once prices approach their break-even points, limiting upside momentum.

Jasper De Maere, an OTC trader at Wintermute, noted that 'the move was squeeze-driven, so holding it falls to spot flow and the persistence of ETF inflows.' Adam McCarthy, who leads research at LO:TECH, added that 'on perps, we're looking at is a one-sided position being forced out rather than money coming in.'

The market remains in a delicate balance, with the next move likely determined by whether ETF inflows resume and whether leveraged traders regain confidence.