Bitcoin’s $87,000 rally just flipped from short squeeze to long risk

Bitcoin’s newly confirmed bull market is already displaying indicators that its recent upward momentum might be cooling off.

In the previous week, the premier cryptocurrency surged to an eight-month peak near $87,400 after breaking through a critical long-term technical level that CryptoQuant identified as the beginning of a fresh bullish cycle. Since then, the Bitcoin Bull Score Index has climbed to 90 out of 100, reflecting broadly positive market conditions.

Furthermore, metrics from Look Into Bitcoin indicate that “Bitcoin sentiment has hit its greediest reading since July 2025.”

However, underneath this surface strength, the equilibrium between fresh buying interest and long-term investors taking money off the table is beginning to shift.

This transition does not yet signify a collapse of the larger trend. Bitcoin continues to hold above several key long-term support markers and has preserved a significant portion of its latest gains. Even so, the combination of softening demand and heavier profit-taking suggests the market may soon encounter its initial major test following the breakout.

Demand fades as spot buying weakens and holders take profits

The most evident pressure is surfacing across the primary demand channels that initially fueled Bitcoin’s climb.

CryptoQuant estimates that apparent spot demand shrank by roughly 170,000 BTC over a 30-day period, pointing to cash-market purchases failing to keep pace with the upward price action.

Flows into US exchange-traded funds reflect a similar trend. CryptoSlate previously reported that daily ETF inflows dropped by 97% over the course of a week, sliding from roughly $1 billion down to just $31 million by Sept. 28.

Meanwhile, speculative interest has cooled down even more rapidly.

CryptoQuant calculates that growth in futures demand has plummeted to approximately 16,000 BTC compared to 164,000 BTC on Sept. 14, stripping away another key layer of incremental buying pressure as Bitcoin pulls back from the $87,400 level.

This slowdown carries greater weight because existing market participants are sitting on substantially larger profits.

Unrealized profit margins for short-term traders have pushed up to 33%, marking the highest point since December 2024 and expanding the pool of potential gains that could be realized if investors decide to scale back their exposure.

Certain market participants have already initiated this process.

According to CryptoQuant, Bitcoin holders locked in profits on 25,700 BTC on Sept. 22—representing the largest single-day total recorded in 2026—as traders capitalized on the rally near the upper boundary of the recent trading range.

Consequently, Bitcoin faces a growing discrepancy: the velocity of new acquisitions has diminished while the volume of profitable coins available for sale has grown.

While this dynamic does not signal a definitive cycle peak, another sustained push higher would likely demand an upswing in spot buying robust enough to absorb the profit-taking from investors who originally acquired Bitcoin at lower price points.

Futures take control as liquidation risk flips to Bitcoin longs

Bitcoin’s underlying market framework has grown heavily reliant on derivatives, even while aggregate leverage levels recede.

Data from CryptoQuant places the spot-to-futures volume ratio on Binance near 0.12, implying that roughly 90% of total trading volume occurs within the futures sector. For every single dollar transacted in the spot market, approximately $8 to $9 changes hands through derivatives instruments.

Despite a contraction in overall leverage, this imbalance has barely shifted due to persistently sluggish retail and cash-market participation.

Binance open interest has tapered down to roughly $9.2 billion from $10.6 billion over the past week. Concurrently, metrics from Glassnode reveal a broader downward trend, indicating that coin-denominated open interest for BTC has fallen by nearly 20% to reach its lowest point since March, despite the recent price appreciation.

This reduction cuts both ways. Lower leverage curbs the speculative fuel needed for another aggressive rally, but it simultaneously shields the market from heavily overcrowded positioning that frequently triggers cascading liquidations.

Even so, the structural makeup of the remaining leverage is becoming increasingly critical.

Figures from Alphractal demonstrate that Bitcoin’s climb toward $87,000 swept through the largest concentrations of short positions built up over the preceding 365 days. The upward surge encompassed what the analytical firm categorized as the year’s largest short-liquidation pool, forcing bearish speculators to exit as prices accelerated upward.

Those liquidations acted as a catalyst, reinforcing the rally as short sellers were forced to repurchase their borrowed assets.

However, that specific reservoir of forced buying has now been largely depleted.

Alphractal noted that the largest unliquidated position clusters are presently heavily skewed toward long positions, reversing the market’s liquidation vulnerability following the recent short squeeze.

As a result, fewer large short positions remain to supply forced purchasing pressure if Bitcoin attempts another leg up. Conversely, a downward correction could begin impacting clustered long positions, converting leveraged traders into a source of forced liquidation selling.

Major institutional players and large investors have also refrained from signaling prolonged bullish commitment.

Joao Wedson, chief executive officer of Alphractal, pointed out that the firm’s Whales vs. Retail Delta recently indicated whales adopting a more bullish stance relative to smaller accounts, though this shift failed to sustain itself. He stressed that the metric must turn positive and stabilize there before offering conclusive proof that larger entities are positioning for an extended continuation of the uptrend.

This evolution in positioning places heightened importance on Bitcoin’s lower technical boundaries should upward momentum continue to fade.

The 365-day moving average hovers near $80,000, representing the key threshold reclaimed when CryptoQuant first designated the beginning of the new bull phase. Further down, the 200-day moving average rests near $71,000, while the realized price for traders sits close to $67,000.

A pullback toward the $80,000 region will serve as the initial litmus test for how resilient the breakout is against shifting demand dynamics and structural positioning. Breaching that level would open the door to deeper support areas while magnifying the danger that the long positions left behind by the short squeeze transform into the next catalyst for forced liquidations.

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• What caused Bitcoin’s recent rally to near $87,400? Bitcoin climbed to an eight-month high after reclaiming a long-term technical threshold, driving the Bitcoin Bull Score Index to 90 out of 100 and pushing market sentiment to its greediest reading since July 2025.
• Why are analysts concerned about weakening demand? CryptoQuant estimates that apparent spot demand contracted by roughly 170,000 BTC in 30 days, and US ETF inflows saw a 97% decline over a single week.
• What does a shift from short to long risk mean for traders? Previous price gains were fueled by short liquidations that forced bearish traders to buy back positions. Now, unliquidated position clusters are concentrated on the long side, meaning a price drop could trigger forced selling from leveraged long traders.
• What are the critical downside support levels to watch? Key levels include the 365-day moving average near $80,000, the 200-day moving average near $71,000, and traders’ realized price around $67,000.