Bitcoin Reclaims $80,000 as Short Liquidations Top $445 Million

Bitcoin has climbed back above $80,000 after a rapid market reversal forced more than $445 million in cryptocurrency short positions to be liquidated, according to reporting by Decrypt. Bitcoin accounted for roughly $230 million of those forced closures.

The cryptocurrency was trading at $80,846, up 5.88% on the day. It began the session at $76,355, reached $80,857 at its highest point and fell as low as $76,236. The advance has revived expectations that Bitcoin could test $80,000 again only days after a political setback in Washington had intensified selling pressure.

Bitcoin remains almost 20% below its previous record high, meaning the latest move has recovered only part of the losses accumulated during what has been a difficult year for the asset.

Fed decision changes the mood

The broader shift in sentiment followed the Federal Reserve’s decision to lift interest rates by 25 basis points on Wednesday. It was the central bank’s first increase since 2023, but its accompanying projections indicated a relatively limited path for further tightening.

The median projection placed the policy rate at 4.1% through the end of 2027. That outlook suggested the latest increase might be followed by only one additional move, rather than a prolonged sequence of rate rises. For assets such as cryptocurrencies, a less aggressive interest-rate outlook can ease concerns about the pressure created by higher borrowing costs.

Crypto traders had entered the week under strain after the Clarity Act failed to pass a Senate procedural vote. Bitcoin fell below $75,000 after the vote, and the setback was followed by fears of a broader market sell-off. The subsequent recovery has been strong enough to put renewed focus on whether Bitcoin can extend its climb rather than revisit those lows.

The latest jump has also been amplified by the mechanics of leveraged trading. A short position seeks to profit when an asset loses value, rather than gains value. In derivatives markets, traders can use collateral to open such positions, often gaining exposure larger than the amount they initially post.

If the market rises instead, losses mount. Once the losses reach a level that the collateral can no longer support, the trading platform may close the position automatically. Closing a short requires buying the asset, and large numbers of those forced purchases can push the price higher. That can trigger further liquidations, producing a feedback loop commonly known as a short squeeze.

Chart signals point to a stronger trend

Several indicators cited by Decrypt suggest that buyers currently have the upper hand, although they also show that the rally has advanced quickly.

Bitcoin’s Average Directional Index, which measures the strength of a price trend without identifying its direction, stood at 40.6. Traders commonly regard a reading above 25 as evidence that a meaningful trend is in progress. Bitcoin’s positive directional line was above its negative counterpart, another indication that upward movement was dominating.

The relationship between Bitcoin’s 50-day and 200-day exponential moving averages has also turned more favourable. The shorter average is above the longer one, creating what traders call a golden cross. Bitcoin entered that pattern last Saturday, and the distance between the two averages has continued to widen gradually.

The Relative Strength Index provided a more measured signal. It was at 63.3 on a scale running from zero to 100, a level generally viewed as bullish but still below the zone above 70 that traders often associate with overbought conditions. However, the indicator is rising rapidly, which may encourage caution after such a large daily gain.

Volatility could return

Another indicator is signalling that the market may not have finished making a large move. The Squeeze Momentum Indicator has remained active for 11 consecutive bars, reflecting nearly two weeks of compressed volatility. Such periods can precede a sharp expansion in price movement. The indicator’s contraction reading was 8.06%, suggesting the release of that pressure may still lie ahead.

That creates a risk of a reversal as well as the possibility of further gains. Some analysts have raised the prospect of a so-called Bart Simpson pattern, in which a strong upward candle is followed by a period of sideways compression and then a large decline that erases the earlier rise.

For now, the next major resistance level identified by the analysis is $82,281. A close above it would strengthen the case that the recent move represents a confirmed breakout. On the downside, support is marked first at $75,569, corresponding to a 61.8% Fibonacci retracement, and then at $68,858, the starting point of the current price leg. A break below the latter level would cast serious doubt on the bullish structure.

The indicators currently favour continued strength in the near term, but the speed of Bitcoin’s recovery leaves limited room for another similarly large daily advance without some consolidation. Decrypt’s reporting is informational and does not constitute financial, investment or other advice.