Short squeeze retreats, Bitcoin meets resistance at $80K: Sovereign yield highs lock in range-bound trading
- Key Takeaways: The mid-August short squeeze briefly pushed Bitcoin to around $80,000, but it met resistance and pulled back below the $83,000–$86,000 long-term holder supply zone. Increased on-chain profitable supply, rebounding macro yields, and cooling derivatives sentiment have collectively locked the price within a clear $62,000–$86,000 range, lacking sustained breakout momentum.
- Key Factors:
- On August 27, Bitcoin surged to $80,000 before facing sustained supply and falling back to $76,000, triggering long liquidations. The rally did not reach the $83,000–$86,000 short liquidation zone, while the long liquidation fuel at $60,000–$63,000 below remains intact.
- Compared with the same price level in May (approximately $78,000), the proportion of profitable supply across the network has risen from 65% to 68%; summer short-term holder cost basis has reset to approximately $71,000, resulting in a thicker pool of potential seller liquidity.
- Spot Bitcoin ETF peak 7-day average net inflows reached $290 million per day, but secondary daily trading volume was only approximately $3 billion—far below previous expansion phases—exhibiting a news-driven, pulse-like pattern.
- The US 10-year Treasury yield rebounded from approximately 4.6% to 4.8% within eight trading sessions and hit a new cycle high, with sovereign debt pressure becoming the primary driver of global discount rates, eliminating the easing effect of Treasury buybacks.
- During the rebound, Bitcoin's 30-day rolling correlation with the S&P 500 drifted toward zero, but historical patterns suggest that sudden decorrelation during sovereign debt sell-offs is mostly a localized exhaustion phenomenon rather than a structural shift.
- The 7-day 25-delta options skew rapidly mean-reverted to neutral after spiking during the squeeze, while the 180-day skew remained stable; the September 25 quarter-end expiry carries approximately $14 billion in open interest, concentrated at strike prices above $80,000.
- Conclusion: Until the $83,000–$86,000 supply zone above is absorbed, the summer accumulation bottom at $62,000–$65,000 serves as the primary downside reference, with the market maintaining a range-bound trading pattern.
Original Author: Glassnode
Original Translation: AididiaoJP, Foresight News
Following the brief market euphoria triggered by the mid-August short squeeze, Bitcoin quickly stalled beneath the overhead supply zone accumulated by long-term holders. With sovereign bond yields hitting fresh cyclical highs and ETF secondary-market turnover remaining subdued, the price has settled back into a well-defined range.
Key Takeaways
- The August short-squeeze rally pushed spot prices to around $80,000 before hitting the anticipated overhead resistance.
- As prices retested the same levels seen in May, the share of supply in profit on-chain rose from 65% then to 68% now, indicating heavier potential selling pressure following summer redistribution.
- Spot Bitcoin ETFs absorbed an average of $290 million per day at their peak, but secondary market daily turnover remains stuck around $3 billion — resembling news-driven impulses lacking sustained momentum rather than structural accumulation.
- Macro headwinds have returned: the US 10-year Treasury yield climbed to 4.8%, erasing all the relief from the Treasury buyback program within just eight trading sessions.
- Short-dated options skew has cooled alongside fading sentiment; the September 25 quarter-end expiry forms a ~$14 billion open interest barrier.
After the Squeeze: Rejected at the Wall
As highlighted in last week's report: the August 19 short squeeze cleared substantial leverage, but the rally was running into dense overhead structure. That scenario played out last week. After prices pushed to $80,000 on August 27, they encountered sustained supply, pulling back to around $76,000 and triggering a cascade of long liquidations.
The futures liquidation heatmap shows prices sandwiched between two structural boundaries. The upward impulse consumed short positions along the way but failed to reach the dense cluster of short liquidations between $83,000 and $86,000. Meanwhile, below spot, the pool of long liquidation fuel in the $60,000–$63,000 zone remains fully intact. Prices are currently trapped between these two constraints.
On-Chain Supply: Overhanging Profit
The hidden friction in this rally lies within the network's profitability structure. When Bitcoin traded near $78,000 in May, approximately 65% of supply was in profit; by late August, with spot returning to the same price level, that share had risen to 68%.
The shift stems from summer accumulation — short-term holders' cost basis was reset to approximately $71,000. Despite the identical nominal price, this activates a larger pool of profitable coins, meaning thicker potential seller liquidity should spot attempt to retest prior highs.
Overlaying on-chain cost models with supply distribution makes the range boundaries clear: below spot, the summer consolidation formed a solid accumulation base between $62,000 and $65,000; above, long-term holders have built heavy positions in the $83,000–$86,000 zone. Spot remains locked between these two bands.
Institutional Flows: Subdued Turnover
US spot Bitcoin ETFs continued to attract inflows during the rally, with the 7-day average net inflow rising to $290 million per day. But secondary trading has been quieter: daily ETF volume holds at roughly $3 billion, well below levels seen in earlier expansion phases. Flows driven by a single policy headline yet lacking broader market velocity often coincide with local turning points — once the catalyst fades, prices tend to give back gains.
Macro Backdrop: Sovereign Yields Resume Climb
The broader environment quickly tightened again. The August 19 Treasury buyback announcement briefly pushed the 10-year yield down to around 4.6%, but the move reversed sharply soon after. Over the following eight trading sessions, yields returned to 4.8% and printed fresh cyclical highs. The speed of the reversal underscores that sovereign debt pressures remain the primary driver of global discount rates.
Early in the rally, Bitcoin briefly decoupled from traditional equity indices as US stocks traded sideways. Over a rolling 30-day window, Bitcoin's correlation with the S&P 500 drifted toward zero. Historically, sudden decoupling during sovereign debt sell-offs tends to be short-lived — more a sign of local exhaustion than a structural regime shift.
Derivatives and Expiry: Sentiment Cools from Euphoria
The options market captured the sharp psychological reversal of the past two weeks. The 7-day 25-delta skew index surged during the squeeze as markets chased upside calls; once resistance held, the metric quickly mean-reverted toward neutral. The 180-day skew remained stable throughout, indicating that while short-term enthusiasm has cooled, the structural demand for longer-dated options has not dissipated.
The forward options landscape is dominated by the September 25 quarter-end expiry, with combined open interest on Deribit and IBIT of approximately $14 billion. A significant concentration of positions sits at strike prices above $80,000, making the upcoming quarter-end expiry a key anchor for volatility and positioning over the coming weeks.
Conclusion
The post-squeeze recovery rally stalled below the $83,000–$86,000 supply zone. With higher network profitability at the same price levels, sovereign bond yields at cyclical highs, and options markets back to neutral, the market remains confined within its existing range. Until the overhead ceiling is absorbed, the $62,000–$65,000 structural base remains the key downside reference.
