Bitcoin recorded a 24.6% price surge in just five days in August, marking its sharpest rally over the two-year trend phase. A collaborative report by on-chain analytics firm Glassnode and crypto exchange Bybit shows that the price jump was driven purely by forced short liquidations rather than the accumulation of new buy positions.
As prices skyrocketed, coin-margined open interest, a measure of active leverage in the market, actually plunged by 12.6%. The drop in leverage figures confirmed the forced closure of traders’ borrowed positions. Approximately 64,000 BTC worth of open interest was wiped out during that five-day rally. Short positions accounted for 89% of every dollar liquidated in the market.
Glassnode’s data was drawn from activity across four leading crypto-native options exchanges, excluding the traditional CME exchange.
361-Day Trend Reversal in a Single Session
The massive short wipeout snapped an options market sentiment that had dominated for nearly an entire year. In the options market, Put contracts, which serve as downside price protection, had consistently traded at a premium over Call contracts for 361 consecutive days. That prolonged bearish trend completely reversed in just a single trading session. Reacting to the reversal, Bybit’s volatility index spiked sharply, exceeding four times its normal daily range.
Signals of a Transient Event on the Futures Curve
Despite the soaring price, market participants did not interpret it as a permanent structural trend shift. The front end of the futures curve underwent sharp repricing in lockstep with the spot market. In contrast, longer-dated contracts barely moved from their baseline. This divergence across the curve indicates that the market viewed the liquidation rally merely as a transient event.
Short liquidation patterns have recurred throughout the market. Price dynamics driven by forced position closures resurfaced when Bitcoin broke above the psychological $80,000 level following the Federal Reserve’s interest rate decision.
Sourced from Decrypt.
Read also: What Is Bitcoin Halving?
Previously: Bitcoin Strikes Back Above $80,000 After Wiping Out Short Positions - Eyes $82,000 Daily Close
Disclaimer: This article is for informational and educational purposes only, not financial advice. Cryptocurrency assets are highly volatile and carry significant risk. Always do your own research (DYOR) and never invest more than you can afford to lose.
