Bitcoin Hits $86K Eight-Month High as Short Squeeze Fuels Rally

Bitcoin surged to an eight-month high of $86,000 on Monday, extending a powerful rally driven by short liquidations, renewed ETF demand and rising leverage across the cryptocurrency market.

The breakout accelerated after Bitcoin cleared $82,000, a resistance level that had capped gains since August. CoinGlass data showed roughly $750 million in bearish crypto derivatives positions were liquidated as prices climbed. Liquidating short positions creates automatic buy orders, adding further upward pressure.

Schwab head of crypto research Jim Ferraioli attributed much of Bitcoin’s 5% morning gain to the liquidation of short perpetual futures positions.

At the same time, traders quickly returned to leveraged bets. Bitcoin futures open interest increased faster than the underlying price, with about $2 billion in new leveraged exposure added following the breakout, according to Coinalyze.

ETF demand has also improved. U.S. spot Bitcoin ETFs recorded $746 million in combined outflows on Tuesday and Wednesday following the failed Senate Clarity Act cloture vote and the Federal Reserve’s rate hike. Flows reversed later in the week, with $160 million entering Thursday and $433 million Friday.

Bitcoin’s rally also pushed the price above the estimated $82,225 average cost basis of U.S. spot ETF investors, putting the average buyer back into profit.

Traders are now watching whether Bitcoin can extend its advance toward $90,000. Nansen senior research analyst Nicolai Sondergaard identified $87,000 as an important near-term level, followed by $90,000 and roughly $92,000. Wintermute OTC trader Jasper De Maere also said a test of $90,000 is possible.

Another positive technical development was Bitcoin reclaiming its 50-week moving average, which previously acted as resistance during bear markets.

However, analysts cautioned that stronger spot-market and ETF demand will be necessary to sustain the breakout. Rapidly rising leverage without corresponding spot buying could leave Bitcoin vulnerable to higher bond yields, geopolitical shocks or forced liquidations.

Traders will therefore closely monitor upcoming ETF flows, perpetual futures open interest and funding rates, as well as Friday’s options expiry for clues about whether Bitcoin’s latest rally can maintain momentum.