Monday’s 5% rally in Bitcoin was driven by short squeezes, not new buying interest, an analyst notes.

Bitcoin rebounded strongly on Monday after weekend weakness tied to U.S. military action against Iran, briefly climbing toward $70,000 before settling back around $69,000.

The move interrupts a grinding multi-month decline that has cut the cryptocurrency’s value roughly in half and pressured investor sentiment. While the bounce offers a psychological boost to bulls, analysts caution that the structure of the rally suggests it may be driven more by derivatives positioning than by a wave of new capital entering the market.

Mark Connors, chief investment officer at Risk Dimensions, said the surge bears the hallmarks of a short squeeze. As prices advanced, traders who had been betting on further downside were forced to buy back bitcoin to close their positions, accelerating the upside move. He added that geopolitical tensions prompted cross-asset rebalancing, while a slowdown — and potential reversal — in spot bitcoin ETF outflows provided additional support.

Short squeezes can produce rapid, outsized gains as bearish traders rush to cover positions. This forced buying can temporarily propel prices higher than fundamentals alone might justify.

Even so, Connors warned that the rally does not yet signal a renewed push toward $100,000 or a clear break above the critical $75,000 resistance zone. Without sustained spot demand, he argued, the advance could prove short-lived.

Positioning data highlight the risks. CoinGlass liquidation heat maps show roughly $218 million in long positions clustered between $65,250 and $64,650 — the area that served as the launchpad for Monday’s rebound. A drop back into that range could trigger a fresh wave of liquidations.

At the same time, open interest has climbed 6% over the past 24 hours, exceeding bitcoin’s 3.8% price gain during the same period. That divergence suggests leverage is building, reinforcing the view that the rally is being fueled primarily by derivatives activity rather than strong spot buying. Traders have also shown signs of taking profits near the psychologically significant $70,000 level.

Conversely, a decisive break above $70,000 could spark roughly $90 million in short liquidations, potentially giving bitcoin enough momentum to challenge February’s high near $72,000.

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