Bitcoin Breaks $85,000 as Short Sellers Face a $648 Million Wipeout

NEW YORK — Bitcoin climbed to an intraday high of $85,111 on Monday, gaining 5.7% in 24 hours as a massive short squeeze caught bearish traders off guard. The world’s largest cryptocurrency cleared a resistance band that had limited its price action for more than a week.

The move came after Bitcoin had held above $75,000 through a week marked by a fresh U.S. Federal Reserve interest rate hike, a historic Bank of Japan rate increase to a 31-year high, and the legislative defeat of the Clarity Act in the U.S. Senate. Analysts described the market behavior as a “sell the rumor, buy the news” phenomenon, arguing that defensive positioning had already taken place ahead of the central bank decisions.

“This fully anticipated rate hike eliminated a degree of uncertainty,” said Tim Sun, senior researcher at HashKey. He said a more transparent macroeconomic landscape is a critical prerequisite for sustained upward momentum in cryptocurrency markets.

Broader pressure on risk assets also eased as volatility in sovereign debt and commodities declined. The benchmark 10-year U.S. Treasury yield had reached 5.014% on September 14, breaching the psychologically important 5% threshold. Stubborn inflation figures and elevated energy costs drove the increase, which recalled the October 2023 bond market selloff, when yields last sustained such levels.

Yields later retreated across the curve, with the 10-year note falling to approximately 4.93% and the 2-year note settling at 4.67%. Investors gained confidence in the Federal Reserve’s inflation-fighting credibility after policymakers made public remarks emphasizing a hawkish commitment to price stability.

Bitcoin’s move above $85,000 followed an aggressive unwinding of leveraged bearish bets. CoinGlass, a derivatives tracking platform, reported that approximately $648 million of the $770 million in total crypto liquidations over a 24-hour period came from traders betting on a price decline.

The squeeze strengthened when Bitcoin reclaimed its 50-week moving average, a widely watched indicator that often separates long-term bullish and bearish market phases. More than $230 million in short positions were forcefully closed during one trading session as Bitcoin recovered $80,000, according to Iliya Kalchev, an analyst at Nexo.

Initial spot buying cleared heavy resistance near $82,000, setting off buy-stop orders that pushed Bitcoin beyond $84,000. A comparable deleveraging episode occurred in August, when a five-day rally lifted Bitcoin 24.6% while active market leverage dropped 12.6%. Short liquidations represented 89% of every dollar wiped out in derivatives markets during that period.

Kalchev said wallets that had engaged in steady selling throughout August reversed course by the end of the month. By September 20, those wallets were accumulating Bitcoin at the fastest single-day pace in weeks.

A proprietary Glassnode metric measuring the intensity of exchange-bound distribution spiked in early September before plunging by September 20 to one of its lowest recorded levels. The reading fell below the capitulation levels seen during the market lows of December 2022.

Institutional flows also changed direction late in the week. U.S. spot Bitcoin exchange-traded funds recorded combined outflows of $746 million across Tuesday and Wednesday, but inflows reached $592 million on Thursday and Friday.

According to SoSoValue, the late-week buying left spot ETFs with a modest weekly net inflow of $6.2 million. That followed a net weekly outflow of $462.7 million in the preceding week, although the latest positive result was the smallest weekly net inflow since the instruments launched in January.

Bitcoin’s advance took place while energy-market pressure was softening. Brent crude oil fell to a half-month low after Middle Eastern export volumes exceeded initial forecasts. Traders also began pricing in the possibility of diplomatic de-escalation, including informal U.S.-Iran discussions at the United Nations General Assembly.

In New York, U.S. and Chinese officials laid diplomatic groundwork for a bilateral summit between Donald Trump and Xi Jinping scheduled for September 24.

James Butterfill, head of research at CoinShares, cautioned that the technical breakout may not ensure a lasting upward trend. The Federal Reserve’s updated summary of economic projections, particularly its dot plot, removed previously anticipated interest rate cuts through 2027. Butterfill said the change supports the U.S. dollar and delays the broad monetary easing that typically provides liquidity tailwinds for digital assets.

Butterfill also said another interest rate hike before the end of the year remains highly plausible. The next direction for the market is expected to depend more on macroeconomic releases than on technical chart patterns.

Investors are watching the Personal Consumption Expenditures (PCE) price index on September 30, the U.S. employment report on October 2, and the Consumer Price Index (CPI) reading on October 14.