Bitcoin tops $80K after record $4B short squeeze

Bitcoin ↗ 0.61% surged past $80,000 for the first time since May after a historic short squeeze wiped out more than $4 billion in bearish positions over a week-long breakout, driven by a U.S. Treasury policy shift that sent risk capital flooding into crypto markets. The rally of approximately 23% marked Bitcoin's strongest one-week return since the post-election rally in November 2024, though the cryptocurrency has since pulled back below the $80,000 level as leveraged long positions now face liquidation risk.

Record Liquidations and the Treasury Catalyst

The squeeze began on August 19, when a record $1.37 billion in Bitcoin shorts were liquidated in a single day — nearly double the previous daily high of $757 million set in July 2021 — followed by another $739 million on August 21, according to K33 Research data. The catalyst was the U.S. Treasury's announcement to double its maximum long-term debt buyback operations to at least $4 billion per transaction starting September 9, a move that crushed bond yields and weakened the dollar.bitbo+3

The forced buying created a feedback loop. As shorts were squeezed out, notional perpetual futures open interest fell to 284,000 BTC — its lowest since May — while funding rates returned to neutral. Spot and perpetual futures volumes jumped 188%, and CME ↗ 1.73% volumes rose 152%.theblock+1

ETF Inflows and Institutional Demand

Bitcoin exchange-traded products recorded net inflows of 31,740 BTC during the week, their strongest performance since October 2025. U.S. spot Bitcoin ETFs attracted roughly $1.9 billion over five trading days, with BlackRock's ↘ 0.26% IBIT capturing the largest share. K33 Head of Research Vetle Lunde noted in a report titled "Altitude sickness can wait" that Bitcoin reclaimed its 50-day, 100-day, 200-day, and 200-week moving averages in just four days — faster than any prior cycle.tradingpedia+3

Bitwise CIO Matt Hougan pointed to Treasury Secretary Scott Bessent's announcement of an "economic onslaught" against Iran's financial connections as a separate catalyst, writing: "The more the global financial system becomes a tool of geopolitical power, the more valuable a neutral financial network becomes."theblock

From Short Squeeze to Long Squeeze

By Wednesday, the dynamic had reversed. Bitcoin briefly dipped to $77,870 before recovering above $79,000, triggering roughly $324 million in liquidations — this time with long positions accounting for about $270 million of the losses. Alphractal CEO Joao Wedson warned that the probability of a deeper long squeeze was rising as leveraged bullish positions rebuilt and funding rates turned positive across exchanges.cryptorank

The market now faces a series of macro tests: Treasury buybacks begin September 9, a CLARITY Act cloture vote is scheduled for September 15, and the Federal Reserve's next policy decision follows on September 16. Whether Bitcoin can sustain its breakout depends on whether spot and ETF demand can absorb profit-taking as the mechanical force of the squeeze fades.cryptorank