The bitcoin market experienced an unusual rally in August, without a wave of new bullish bets. In five days, the price gained 24.6%, while cryptocurrency-denominated open interest fell 12.6%. A report from Glassnode and Bybit links this rise to liquidations of short positions. Around 64,000 BTC of open interest disappeared during this phase. Sellers fueled the move, while the options market confirmed persistent downward pressure.
In brief
- Bitcoin surged 24.6% in five days despite falling open interest.
- Short positions accounted for 89% of the liquidations recorded during this increase.
- Around 64,000 BTC of open interest was liquidated during the move.
- The options market has yet to confirm whether this revaluation can last.
Liquidations dominated the rally
According to the report, bitcoin’s rise of 24.6% occurred. Active leverage decreased significantly during this period. Cryptocurrency-denominated open interest fell 12.6%. Rather, the movement stems from the forced closure of short positions already present on the market.
In total, approximately 64,000 BTC of open interest were liquidated during this period. Short positions accounted for 89% of every dollar liquidated, according to Glassnode and Bybit. The majority of liquidations involved traders betting on a decline. This mechanism reinforced the price progression, while exposure to leverage decreased.
THE report describes a movement linked to the unwinding of bearish bets. The price of bitcoin has not increased solely thanks to an increase in long positions. The forced liquidation of sellers played a central role, and bitcoin concentrates this sequence. This distinction explains why the course has advanced despite the decline in interest.
Options market confirms Bitcoin selling pressure
The options market provides a crucial element. Puts, used to protect against a decline, have cost more than calls for 361 consecutive days. A single session interrupted this series, causing the rapid disappearance of a large part of the bearish positions. The market then readjusted its prices in response to this change.
The Bybit volatility index experienced exceptional variation during this session. Its daily amplitude reached four times its usual level, according to the report. The short end of the futures curve has undergone a significant revaluation. Longer timeframes saw little movement, suggesting the market treated the episode as a one-off event, while Bitcoin remains central.
Bitcoin saw a rapid rise as short positions narrowed sharply. Options and futures saw adjustments. These adjustments mainly concerned the shortest maturities. However, the data is not sufficient to establish that a lasting change in the market has taken place.
A question remains about the sustainability of the movement
The report specifies that its data ends as of the August 23 close. The analysis covers four crypto-native options platforms and excludes CME. The numbers describe this segment of options, not all platforms where Bitcoin is traded. This precision limits the conclusions to the universe studied by Glassnode and Bybit.
The dynamic of liquidations continued after this phase. Bitcoin rose above $80,000 after a decision by the Federal Reserve with accommodative forecasts. This increase triggered a wave, with more than $230 million in short positions. In the market, liquidations exceeded $445 million, while CoinGlass reported $529 million over 24 hours.
The authors of the report leave one question: can the reassessment observed in August last? A persistent move would require an imbalance between the supply and demand of calls. The stability of short positions would remain necessary on the curve. Conversely, the return of a premium on puts with a drop in financing would signal that the market has absorbed the event.
In the short term, the data mainly shows the role of liquidations in the observed progression, with BTC remaining under observation. What happens next will depend on how positions, options and financing evolve after this shock. The report therefore does not decide between a one-off episode and a lasting transformation. He does not decide on this structure.
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