Why does the market need a billion-dollar short squeeze?

BTC/USD

Key zone: 73,500 - 76,000

Buy: 76,500 (upon a confirmed break of 76,000); target 80,000; StopLoss 75,500

Sell: 73,000 (against a strong negative fundamental backdrop) ; target 70,000-68,500; StopLoss 74,000

Over the past 24 hours, Bitcoin has gained more than 12%. This is all thanks to Trump meeting with crypto companies and saying that he is ready to add to the U.S. Bitcoin reserve. Yesterday’s signal has already been fully priced in in terms of its impact on yields. That is why the Treasury Secretary is already trying to send another signal today.

Verbal pressure and technical signals are all well and good, but fundamentally, the program to replace less liquid issues with more liquid ones changes nothing, so government bond yields remain high by U.S. standards.

A reminder:

The 30-year Treasury yield reached its highest level since 2007 this week. This and other negative factors pushed crypto speculators to open new shorts without even considering an upside breakout from the range, creating the perfect environment for a short squeeze. Almost immediately after yields hit record highs, the U.S. Treasury suddenly announced a twofold expansion of its bond buyback program at the long end of the curve. Bitcoin surged.

But is this really such “big news” that Bitcoin should surge so sharply from $64,000 to $79,000?

• Of course, doubling the buyback volume sounds substantial. But in reality, this means an increase from $2 billion to at least $4 billion per operation. For a U.S. government debt market exceeding $32 trillion, this amount is too small to have a serious impact on the problem. And the decision will not take effect until September 9. This is not a change in the amount of debt; it is a change in its structure aimed at improving liquidity.
• Yes, bond yields have put significant pressure on crypto in recent weeks. But such an aggressive reaction would not have occurred without the accumulated “fuel” from short covering.
• Today alone, more than a billion dollars in short positions were closed in just one hour. At the same time, judging by Open Interest, there was no active buildup of long positions at that moment.
• Judging by the Fear & Greed Index jumping to 61 (at the time of publication), many have fallen into euphoria and “seen” the beginning of a bull market. We view this with some skepticism.
• Technically, market conditions were already favorable not merely for a short squeeze, but for a relatively inexpensive short squeeze. Bearish expectations had gradually accumulated, while traders continued increasing short positions in anticipation that the range would hold or break lower. As a result, the perfect environment for cascading liquidations emerged.

Therefore, we do not yet believe in a sustainable bull market. Especially since another channel for liquidity outflows from crypto is emerging — rules for trading derivatives on computing power are being discussed.

The main macroeconomic problem has not disappeared.

After the initial decline, Treasury yields began rising again. On August 20, the 30-year yield was around 5.25%, while the 10-year yield was around 4.7%. This shows that the market does not view the Treasury’s actions as a comprehensive solution to the debt burden and inflation risks.

In other words, the current BTC rally following the bond buyback announcement cannot be viewed as confirmation of a sustainable inflow of new liquidity.

So, what does this mean?

Capital flows into ETFs (with BlackRock being particularly active) are currently providing buyers with important fundamental support: on August 20, U.S. spot Bitcoin ETFs received around $606 million, the highest amount since early May. But to confirm a new trend, similar demand must continue even after the short squeeze ends.

The key reference zone is $76,000–80,000. As long as BTC remains above $75,000, the short-term trend stays bullish, while consolidation above $80,000 could open the way for further recovery. A return below $75,000 would increase the probability of a correction toward $73,000 and then $70,000–72,000.

Therefore, it is more rational now not to chase the vertical candle but to wait for confirmation. A genuine bull run will begin not when the shorts are liquidated, but when Bitcoin continues to rise without needing to liquidate them.

So we act wisely and avoid unnecessary risks.

Profits to y’all!