Bitcoin’s sharpest weekly rise since November 2024, combined with a record wave of short-position liquidations and a potential US Treasury policy catalyst, may mark the beginning of a broader reset in the cryptocurrency’s bull market, analysts at K33 and Bitwise say.
The price of bitcoin increased by 23% in the past week as trading activity recovered across the wider cryptocurrency market. Spot and perpetual futures volumes climbed by 188%, while volumes on the Chicago Mercantile Exchange rose 152%.
The annualised basis on bitcoin futures traded on the CME reached 11.1%, its highest level since January 2025. Bitcoin exchange-traded products also attracted net inflows equivalent to 31,740 BTC, marking their strongest week since the market highs of October 2025, according to K33 head of research Vetle Lunde.
In a report titled Altitude sickness can wait, Lunde said the first phase of the rally was driven largely by forced buying, after traders betting on falling prices were compelled to close their positions.
A record $1.37bn in bitcoin short positions were liquidated on 19 August, according to K33 data. That was almost twice the previous daily record of $757m, set in July 2021. A further $739m of short positions were liquidated on 21 August.
The squeeze reduced notional open interest in perpetual futures to 284,000 BTC, its lowest level since May, while funding rates returned to neutral territory.
Lunde said major short squeezes had historically appeared during periods when bitcoin was forming a market bottom. Such events often occur when pessimistic positioning becomes excessively crowded and sellers have largely exhausted their ability to drive prices lower.
Technical and options signals turn positive
Several other indicators have also moved in a more supportive direction during the recovery.
Bitcoin’s six-month 25-delta options skew turned negative for the first time since September 2025. The shift means call options became more expensive than puts, reversing a trend that had lasted 11 consecutive months, during which traders had paid a premium for protection against a fall in price.
Lunde said previous reversals in long-term options skew had proved reliable indicators of changes in bitcoin’s directional momentum.
The cryptocurrency also reclaimed its 50-day, 100-day, 200-day and 200-week moving averages within four days. K33 said that was faster than in any previous cycle.
The only earlier occasions on which bitcoin recovered all four averages within 45 days were October 2015, April 2020 and October 2023. Lunde said each of those periods coincided with the early stages of a cyclical bull market.
The latest advance has come against a changing macroeconomic backdrop, with attention focused on US Treasury Secretary Scott Bessent.
Lunde said Bessent’s support for increasing Treasury buybacks of long-term bonds suggested the government was prepared to intervene in the market. That stance helped stimulate demand for scarce assets, he argued. Reports later emerged that the Treasury could use its nearly $1tn Treasury General Account to finance larger buybacks.
Bitcoin and gold both rose during the period while equities declined. Bitcoin’s 90-day correlation with gold increased to 0.52, its highest level since October 2020, while its correlation with the Nasdaq fell to 0.38, a one-year low, according to K33.
Lunde described the divergence as encouraging and said bitcoin could be well placed if attempts to reduce long-term US yields intensified. However, bitcoin remains 36% below its all-time high.
Bitwise chief investment officer Matt Hougan believes another development associated with Bessent could further strengthen the investment case.
In a note to clients on Tuesday, Hougan pointed to Bessent’s subsequent announcement of an “economic onslaught” against Iran’s global financial connections. The measures included threats to remove entities involved in facilitating money laundering for Iran from the US dollar system.
Hougan said the two developments demonstrated different aspects of bitcoin’s appeal: its limited supply at a time when governments may seek to reduce long-term borrowing costs, and its ability to function as a globally transferable monetary asset outside the banking system of any single country.
“The more the global financial system becomes a tool of geopolitical power, the more valuable a neutral financial network becomes,” he said.
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