Bitcoin roared past $80,000 on Tuesday for the first time in more than three months, setting off a wave of forced liquidations that traders and analysts described as one of the sharpest short squeezes crypto markets have seen this year.

The world's largest cryptocurrency opened Tuesday at $78,982.27, up 1.6% from Monday, before touching an intraday high of $81,023.41 — its first trip above $80,000 since May 15, a gap of 113 days. The move capped a blistering week: bitcoin started Monday around $63,000, meaning it gained roughly 23% to 25% in a matter of days. Ethereum rode the same wave, opening Tuesday at $2,482.37, up nearly 30% over the week.

Shorts Get Steamrolled

The rally's speed was driven less by new buying than by traders who had bet against bitcoin being forced to close those positions at a loss. CoinDesk reported that futures open interest collapsed as roughly $452 million in crypto short positions were liquidated in 24 hours, including $179.2 million in a single four-hour window. Earlier in the rally, on August 19, about $1 billion in shorts were wiped out in roughly one hour. Charles Schwab strategist Jim Ferraioli put the cumulative figure at $6.4 billion in leveraged short liquidations since the prior Wednesday.

SHORT SQUEEZES TEND TO BE SHORT LIVED, BUT THIS COULD SETTLE THE DEBATE AS TO WHETHER THE BOTTOM IS IN.

That's Ferraioli's read on the move. Two catalysts appear to have kicked it off: the U.S. Treasury announced it would double its long-term bond buyback program to $4 billion per session, pushing yields down and weakening the dollar, and renewed optimism followed a White House meeting last week between President Trump and executives from Coinbase and Robinhood over crypto market-structure legislation.

There's evidence the rally isn't purely mechanical, either. U.S. spot bitcoin ETFs pulled in $1.92 billion for the week ending August 21 — the strongest weekly inflow since October 2025 — suggesting genuine institutional demand alongside the forced buying.

Even so, bitcoin remains well off its all-time high of $128,198.07, set last October, and is down roughly 30% year-over-year, underscoring that this is a rebound in a down market rather than a new record. Analyst "Rekt Capital" flagged the 50-week EMA at $77,251 as the level bulls need to defend, warning: "If this is a Bear Market Relief Rally, then Bitcoin could pullback as early as this week, or at least over the next few weeks. Now it's all about Bitcoin proving sustained strength."

Whether spot demand can replace forced short-covering as the rally's driver is the question markets will be watching this week. A clean hold above $80,000 could open a run toward $85,000 to $90,000, analysts say — while a failure to hold risks a fast reversal.