Bitcoin short squeeze pressure hammered bearish positions on Wednesday as the largest digital asset rallied through the $80,000 threshold for the first time in weeks, reaching an intraday peak of $80,857 before settling near $80,846, a 5.88% climb over 24 hours. The decisive move followed the Federal Reserve’s decision to raise interest rates by 25 basis points, paired with a surprisingly dovish summary of economic projections that traders read as the end of the tightening cycle.
The Bitcoin short squeeze that erased $230 million in bearish bets
The vertical move through $80,000 triggered more than $230 million in Bitcoin short liquidations, with the broader crypto market recording over $445 million in forced buy-ins across the same 24-hour window. Liquidations cascade when exchanges automatically close leveraged short positions once the underlying price breaches a margin threshold, forcing the seller to repurchase the asset at a higher level and amplifying the upward move. The size of the Bitcoin short squeeze on Wednesday marked one of the largest single-day forced-covering events of the quarter, according to data cited in the original Decrypt report.
How the Fed dot plot fueled the Bitcoin short squeeze
The Federal Open Market Committee raised the federal funds rate by a quarter point on Wednesday, September 17, 2026, the first increase since 2023, but the accompanying “dot plot” showed a median projected policy rate of 4.1% through the end of 2027. That figure implies only one additional move rather than the sustained tightening cycle that futures markets had priced in during the prior week. Traders had positioned for a more hawkish path, leaving a heavy short stack vulnerable to any dovish surprise. The dot plot delivered that surprise, and short sellers rushed to cover.
Technical setup that preceded the Bitcoin short squeeze
Several momentum and trend indicators had already flashed bullish in the sessions leading up to the squeeze. The Average Directional Index read 40.6, comfortably above the 25 threshold that confirms a trend, and a golden cross, the pattern in which a short-term moving average rises through a long-term moving average, was confirmed on Saturday, September 13. The Relative Strength Index sat at 63.3, in bullish territory but still below the 70 level that traditionally signals overbought conditions. The Squeeze Momentum Indicator has printed “on” for 11 consecutive bars, with the latest contraction reading at 8.06%. Immediate resistance sits at $82,281, with support levels at $75,569 and then $68,858.
Where Bitcoin trades after the Bitcoin short squeeze
By Saturday, September 20, Bitcoin was changing hands near $81,300, according to BraveNewCoin citing Glassnode on-chain data, having ranged between $77,968 and $81,675 over the preceding 24 hours. The entity-adjusted Spent Output Profit Ratio, which measures whether coins are being moved at a profit or a loss, climbed back above the 1.0 break-even level, a sign that holders are realizing gains rather than capitulating. The supply concentration between $83,000 and $86,000 holds roughly 1.07 million BTC, a band that will likely serve as the next ceiling if buying pressure persists. The 50-day exponential moving average sits near $74,242 and the 200-day EMA near $73,278, both well below the current price and providing a long-term bullish cross.
Despite the rally, Bitcoin remains down nearly 20% from its previous all-time high set earlier in the year. The failure of the Clarity Act to clear a Senate procedural vote earlier in the week had knocked the asset below $75,000, and the relief rally that followed the Fed decision has been compounding since. Whether the Bitcoin short squeeze marks the start of a sustained push toward new highs or a single-session squeeze will depend on follow-through from buyers once the cluster of supply between $83,000 and $86,000 comes into play.
Derivatives positioning data suggests the Bitcoin short squeeze may have further to run before leverage on the long side reaches comparable strain. Coinglass figures show aggregate open interest on perpetual futures at $34.2 billion as of the Saturday close, up from $28.6 billion a week earlier but still below the $41.8 billion peak recorded on August 5, 2026. Funding rates across major venues have remained positive but modest, with the eight-hour weighted average at 0.0123%, well under the 0.05% level that has historically marked euphoric long positioning. Meanwhile, the put-call ratio on Deribit options has flipped to 0.61, down from 0.94 two weeks ago, indicating that options traders are now paying a premium for upside exposure rather than hedging downside. On the regulatory front, SEC Chair Paul Atkins told Bloomberg Television on Friday that the agency’s crypto task force is preparing a “limited-purpose broker-dealer framework” expected before year-end, a development that Galaxy Digital researcher Charles Yu argued in a September 19 client note could unlock roughly $27 billion in sidelined institutional capital if finalized. With the 21-week moving average at $78,941 now acting as support and macroeconomic tailwinds still in place, analysts at QCP Capital wrote that a retest of the $86,000 supply band appears “a matter of timing rather than possibility” heading into the final quarter.
Source: https://decrypt.co/378630/bitcoin-blasts-short-squeeze-crypto-liquidations