Bitcoin explodes higher as historic short squeeze ignites crypto rebound 

Bitcoin explodes higher as historic short squeeze ignites crypto rebound

Bitcoin staged a dramatic comeback on Wednesday, surging almost 8% towards $69,500, its highest level since early June, as a powerful combination of improved liquidity and heavily crowded bearish positioning triggered a historic short squeeze. More than $1 billion of Bitcoin shorts were liquidated in around an hour, while total crypto liquidations reached roughly $2.7 billion, turning an initial rally into a self-reinforcing wave of forced buying.

The rally continued in Asia overnight with Bitcoin heading towards $72,000 on Thursday morning in Europe and Ether trading close to $2,300.

How the Treasury's bond buyback decision helped spark the move

The move was helped by the US Treasury's decision to at least double the size of its long-dated Treasury buybacks to $4 billion per operation, which sent bond yields sharply lower and weakened the dollar, improving the broader liquidity backdrop for risk assets such as cryptocurrencies. The announcement helped calm markets after the recent surge in long-term borrowing costs, with the 30-year Treasury yield falling almost 10 basis points from its 22-year 5.33% high.

Why positioning turned a rally into a short squeeze

However, the scale and speed of Bitcoin's rebound was primarily a function of positioning. After weeks of selling pressure and a slide towards the low-$60,000s, bearish bets had become heavily concentrated.

Once Bitcoin broke through key resistance between its June-to-July peaks at $66,935.50-to-$67,259.92 and liquidation levels, short sellers were forced to buy back the cryptocurrency, accelerating the rally and creating the classic feedback loop seen during crypto short squeezes. Bitcoin briefly reached around $69,750, while Ethereum also surged back above $2,000.

Bitcoin daily candlestick chart

Overnight trading in Asia and in the early European session have so far added another 3.5% gain to Bitcoin, taking it close to $72,000 whereas Ether added a more modest 1% gain to its over 17% Wednesday rally, close to the $2,300 mark, a 3-month high.

A broad-based rally with political tailwinds

The rally was broad-based, with Ether outperforming Bitcoin – taking the spread back towards its late January high.

Ether/Bitcoin spread daily candlestick chart

Crypto-linked equities also gaining strongly as investor sentiment received an additional boost from Donald Trump's meeting with crypto-industry executives at the White House, while the administration's push for a more crypto-friendly regulatory framework added to optimism around the sector.

Can the move develop into a genuine recovery?

For Bitcoin, the key question now is whether the move can develop into a genuine recovery rather than simply a positioning-driven squeeze. The cryptocurrency has reclaimed important technical levels, but the sharpness of the move means traders will now be looking for sustained spot demand to confirm that buyers have genuinely regained control. 

Bitcoin and Ether technical analysis

Now that Bitcoin has not only risen and closed above its 200-day simple moving average (SMA) at $68,983.74 on Wednesday but continued its sharp rally on Thursday morning by gunning for the $72,000 mark, bullish momentum seems entrenched.

Potential upside targets are the late May low at $72,402.13, the 61.8% Fibonacci retracement of the May-to-July decline at $73,239.11 and the 20 April low at $73,711.71. In this vicinity the current rally may pause.

Bitcoin daily candlestick chart

If not, the 23 May low at $74,156.43 may be reached too, ahead of the late April low at $74,931.00 and the psychological $75,000 region.

Only a bearish reversal and fall below the 200-day simple moving average (SMA) at $68,983.74 may take the wind out of the current rally’s sails but even then the June-to-July highs at $67,259.92-to-$66,935.50 would be expected to offer support.

The Ether rally looks even more dramatic with the crypto currency having briefly risen to $2,328.09 on Wednesday, a level last traded on the 12^th of May 2026.

A cluster of highs and thus strong resistance may be spotted above this level, though, and sits between the March-to-May highs at $2,381.66-to-$2,464.83. This area is likely to cap the upside for some time, were it to be revisited.

Ether daily candlestick chart

At present the late April low at $2,220.81 seems to be offering support but a fall through it may lead to the February-to-early March highs and mid-April low at $2,198.36-to-$2,144.65 being revisited.

A reminder of crypto's propensity for violent reversals

This week’s swift advance is also a reminder of crypto's propensity for violent reversals: after months in which selling pressure dominated, the accumulation of short positions left the market vulnerable to a sharp upside move. Once prices started rising, forced buying did much of the rest.

The opposite was the case in early June when long position stops were triggered and led to an over 21% drop within four days in the price of Ether and a 17% fall in the price of Bitcoin with five days.

This is why trading or investing in cryptocurrencies is associated with high risk and isn’t for the faint hearted.