After plunging over the weekend as the US began attacks against Iran, bitcoin shot higher on Monday, at one point approaching $70,000 before pulling back to the current $69,000.
While any rally in bitcoin is welcomed by the bulls, today’s move comes after a relentless months-long slide that has halved the price and weighed on sentiment. One analyst suggested that Monday’s rapid gains bore the hallmarks of a positioning squeeze, where traders who had bet on further downside were forced to exit those trades as prices rose.
“This is clearly a flush of shorts due to the confluence of the Iranian attacks causing a rebalancing across the entire bitcoin capital stack that has a tailwind from a reversal of spot bitcoin ETF outflows,” said Mark Connors, chief investment officer at Risk Dimensions. In other words, macro shocks triggered repositioning across markets and bitcoin benefited as some investors rotated back to risk and recent spot bitcoin ETF outflows slowed or reversed.
A short flush can create sharp, fast rallies. As traders who borrowed to bet on falling prices rush to close their positions, they must buy back the asset, adding fuel to the move. These dynamics can push prices higher than fundamentals alone would warrant, at least in the short term.
“This is not a signal of the march back to $100,000 and through the all-important 75,000 resistance,” a cautious Connors said. In his view, the rally does not yet mark a decisive break from the broader downtrend. Key resistance levels remain overhead, and without sustained spot demand, the rejection could stall as quickly as it began.
Market positioning data underscores his caution and shows how badly hurt the derivatives market has become.
Data from CoinGlass’ liquidation heat map shows a $218 million cluster of positions that will be liquidated if the price falls to between $65,250 and $64,650, which was the base from which Monday’s rally started.
This, combined with open interest up 6% over the past 24 hours while price is up 3.8%, suggests the move is supported by leverage rather than spot buying, prompting a number of traders to take profits at the psychological resistance level of $70,000.
On the other hand, a break above $70,000 would trigger short liquidations for around $90 million — likely enough fuel to challenge February’s high of $72,000.
