Bitcoin Eyes $90,000 as Short Squeeze Fuels Rally, But Leverage Raises Caution

Bitcoin climbed to an eight month high near $86,000 after breaking through a key resistance level, triggering a wave of short liquidations, though analysts warn that rapidly rising leverage could pose risks if spot demand doesn’t keep pace.

Breakout Triggers Wave of Liquidations

Bitcoin’s push past $82,000, a level that had capped prices since August, led to hundreds of millions of dollars in bearish position liquidations, adding further momentum to the rally as exchanges automatically bought back shorted positions. At the same time, billions of dollars in new leveraged bets entered the market, suggesting traders are adding fresh exposure even as older bearish positions are wiped out. Analysts noted that price has turned bullish faster than overall market positioning, indicating some traders remain cautious despite the rally.

ETF Flows Reverse Sharply

Spot bitcoin ETFs saw significant outflows earlier in the week amid stalled legislation and a Federal Reserve rate hike, but flows quickly reversed, with strong inflows returning by the end of the week. The rally also pushed the average cost basis for ETF investors into profit territory for the first time in some time, while bitcoin reclaimed a longer-term moving average that some traders view as a signal of trend strength.

Next Targets and Lingering Risks

Analysts pointed to $87,000 and then $90,000 as the next key levels to watch, with some suggesting the rally could mark the start of a new bullish cycle, though they also expect a meaningful pullback once the current momentum fades.

Talk of a new all-time high was described as premature, given how volatile early bull markets tend to be. The bigger question going forward is whether actual spot buying keeps up with the surge in leveraged positioning, as a similar imbalance in the past triggered one of the market’s largest liquidation events. Traders say they’ll be watching ETF flows, funding rates, and upcoming options expirations closely in the days ahead.