A total of $3 billion in short positions was liquidated in just 18 hours between August 19 and 20, 2026. This figure marks the largest short squeeze since the collapse of FTX in November 2022, wiping out traders’ positions that had been slowly built up over the past six weeks.
From July to August, the market was indeed dominated by the belief that prices would fall. The postponement of the Senate vote on the CLARITY Act bill to September, combined with the SEC’s steps to finalize “Regulation Crypto Assets” rules, weighed on market prospects. This conviction was visible in crypto exchange order books. Before the liquidation event occurred, short positions accounted for 51.64% of open interest on Binance. A similar condition occurred on OKX at 51.13% and Bybit at 52.25%.
The massive number of downside bets kept the 8-hour funding rate for Bitcoin perpetuals on Binance locked at minus 0.012% on August 18, persisting for three consecutive weeks. This means that a trader holding a $10 million short position routinely pocketed a $3,600 payout every day just to maintain their position.
Two Blows from Washington
On August 19 at 14:30 UTC, the US Treasury Department announced an increase in its 10-30 year bond buyback program. The value was doubled from $2 billion to $4 billion per operation, effective from September 9 to November 4.
Bitcoin immediately responded to this announcement, jumping from $64,100 to $66,800 in the first hour to trigger margin calls. Before traders could even restructure their strategies, a second piece of news arrived that Donald Trump would host a crypto industry summit at the White House in late August. The event, which is set to be attended by senior SEC officials and executives from major exchanges, accelerated the upward price momentum.
Bitcoin finally broke the $71,000 level on August 20. In the spot market, the daily volume of Bitcoin ETFs recorded $5.3 billion. BlackRock dominated transactions with $4.44 billion, followed by Fidelity at $438 million and Grayscale at $208 million. At the peak of the price pressure, the X account WatcherGuru tweeted that $222 million worth of short positions were liquidated in just 60 minutes.
Ethereum Hit Hardest
Although Bitcoin led the sentiment, Ethereum posted an 18% gain in a single day, outperforming Bitcoin’s 8% rise. Total liquidated Bitcoin short positions reached $1.37 billion, while Ethereum followed closely at $1.01 billion. The remaining liquidations hit altcoins like Solana, XRP, and Dogecoin.
Ethereum’s rapid surge was triggered by a high ratio of short positions relative to total open interest. Traders heavily shorted Ethereum due to skepticism over the Pectra upgrade schedule and continuous outflows from spot Ethereum ETFs. This massive pileup of short positions also posed a risk to decentralized finance structures, with the Aave protocol reportedly bearing the brunt of the impact.
This liquidation pattern repeats an old lesson in the crypto market. When everyone stands on one side of the boat and views short positions as a source of daily income, a minor change from outside the market can throw all its passengers into the sea. Reported by crypto.news.
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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.
