Over $3 billion in crypto derivatives positions were liquidated in 45 hours on August 19-20, with short sellers bearing 92% of the losses at $2.77 billion. The catalyst was the US Treasury’s decision to double buyback operations for longer-dated bonds, triggering a Bitcoin price surge to $79,600. Open interest in Bitcoin futures fell 15% to 312,600 BTC, indicating the rally was driven by short-covering rather than new buying. Funding rates turned positive post-squeeze, suggesting a temporary correction in market imbalance. This was the largest short squeeze since late 2021, highlighting the risks of crowded bearish positions.
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