Bitcoin could test $90,000 after shorts get squeezed, but traders warn leverage is building

Bitcoin pushed to a fresh eight-month high of $86,000 on Monday, extending a rally that forced bearish traders out of their short positions and drew fresh leverage bets back in.

Roughly $750 million in bearish crypto derivative positions were liquidated as bitcoin cleared $82,000, a level that capped prices since August, CoinGlass data shows. When short positions are liquidated, exchanges execute buy orders to close them, adding fuel to an already upward market.

“Bitcoin up 5% this morning due to short perpetual futures contracts being liquidated,” Schwab’s head of crypto research Jim Ferraioli told CoinDesk.

Meanwhile, futures open interest (the value of outstanding derivatives bets) rose even faster than bitcoin’s price.

Since the breakout, about $2 billion in new leveraged exposure has been added, according to Coinalyze data, suggesting traders are pacing fresh bets even as shorts got wiped out.

While the rally has been fueled by a mix of renewed ETF demand and short covering, crypto-native positioning has been slower to shift from bearish to bullish, according to crypto analytics firm Nansen’s senior research analyst, Nicolai Sondergaard.

U.S. spot bitcoin ETFs saw a combined $746 million of outflows on Tuesday and Wednesday as the Clarity Act cloture vote failed in the Senate and the Fed hiked rates, according to data by Farside Investors. Then, flows quickly reversed, taking in $160 million on Thursday and $433 million on Friday, the strongest inflow day of the week.

“The important distinction is that price has turned bullish faster than positioning has,” he said.

U.S. spot bitcoin ETFs saw a combined $746 million of outflows on Tuesday and Wednesday as the Clarity Act cloture vote failed in the Senate and the Fed hiked rates. Then, flows reversed just as fast, taking in $160 million on Thursday and $433 million on Friday, the strongest inflow day of the week. Monday’s flow data will come later and will also be something traders watch in the wake of the rally.

Additionally, bitcoin’s rally on Monday also triggered a milestone for holders of bitcoin exchange-traded funds (ETFs), with the average cost basis for U.S. BTC ETF buyers at $82,225 representing the first time in a while that ETF investors are making profits.

The move through $82,000 is getting attention because that level had already stopped bitcoin once. An attempt to break through in May failed, and the price slid below $60,000 in June.

With the new rally, the next psychological level is $90,000.

Nansen’s Sondergaard pointed to $87,000 as the next level to watch, followed by the psychological $90,000 mark and then roughly $92,000. Meanwhile, Jasper De Maere, OTC Trader at Wintermute, also sees a $90,000 test as possible.

The latest breakout came despite last week’s turbulent macro and political pressures, which included the failure of the Clarity Act to advance and a Federal Reserve rate increase accompanied by hawkish commentary.

Bitcoin also reclaimed its 50-week moving average, a longer-term trend line that some traders use as a signal for their strategies. Wintermute’s De Maere said this measure of average price acted as resistance during previous bear markets.

Breaking through that trend might have provided traders with some confirmation of a positive trading signal, De Maere noted.

“We, like many others, would read this reclaim as confirmation that the June low holds.”

However, traders are cautiously optimistic.

Chris Sullivan, co-portfolio manager at Hyperion Decimus, said he views the move as the beginning of a new bullish cycle, though he expects a significant pullback after the rally runs its course.

“This should be the first primary wave/rally of the new bull market,” he said, while cautioning that “we’re going to see a large correction once this rally exhausts itself.”

And with any rally comes hope for a further bull run. In fact, some seem to be talking about a new all-time high on social media.

But Wintermute’s De Maere said talk of a fresh record above bitcoin’s $126,000 October 2025 peak before year-end is still “premature at the moment,” noting that early bull markets tend to come with plenty of volatility.

The bigger test now is whether demand in the spot market, where investors buy bitcoin outright, catches up with the move in derivatives.

“I want to see sustained spot and ETF flows,” Sondergaard said. Without them, this breakout could turn into a leverage-driven move that could be quickly reversed by higher government bond yields or another geopolitical shock.

Rapid leverage buildup can become dangerous if underlying spot demand fails to keep pace. Crypto saw the extreme version of that on Oct. 10, when bitcoin tumbled from near-record prices, forcing liquidations that fed into the decline and triggering roughly $19 billion in leveraged positions in the market’s largest liquidation cascade.

Ferraioli noted that altcoins also started to surge alongside bitcoin, a sign that risk appetite is broadening. The real test, he added, is whether activity on smaller blockchains actually rises rather than prices simply bouncing harder after being oversold.

Investors will now be paying close attention to three things, according to Wintermute’s De Maere: ETF flows over the next few days, signs of excess in perpetual futures through inflated open interest or funding rates and Friday’s options expiry.

“So far this rally is looking pretty healthy,” he said.

Read more: Bitcoin’s price has cleared a key hurdle that has historically preceded major bull runs