Bitcoin August surge driven by short liquidations, raising question of bullish turn

Bitcoin's sharp surge in August was driven by liquidations of short positions rather than new bullish bets.

Blockchain outlet Decrypt reported on Aug. 19 that a joint report by on-chain analytics platform Glassnode and Bybit found open interest fell 12.6 percent as bitcoin rose 24.6 percent over five days in August.

That means the move was amplified by forced closures of existing short positions rather than traders building new long positions. About 64,000 BTC of open interest was liquidated over the period, and 89 percent of dollar-denominated liquidations came from short positions.

The options market showed the same pattern. Put options, used as downside protection, had been priced higher than calls for 361 consecutive days, but that flipped in a single day. The market repriced nearly a year of bearish positioning at once.

The futures market structure also suggested it was hard to view this as a long-term trend reversal. Bybit's volatility index moved to about four times its usual daily range in a single day. The futures curve was sharply readjusted only at the short end, while the long end barely moved. The report said this was a signal the market viewed the move as a one-off event rather than a sustained regime change.