What Explains the Surge in Short Positions as Bitcoin Hits Fresh Highs?

Bitcoin Surpasses $110K Amid Surge in Aggressive Short Positions

Bitcoin broke past the $110,000 threshold on Thursday, igniting approximately $500 million in liquidations across derivatives markets. Despite the bullish breakout, a growing number of traders are wagering on a price reversal by taking aggressive short positions.

Over the past 24 hours, trading volume soared by 74% as market participants scrambled to adjust their stances. Yet, Coinalyze data reveals that the long-to-short ratio has hit its lowest point since September 2022, signaling a strong bearish bias even as prices climb.

This trend kicked off around April 21 when traders ramped up short bets after BTC’s surge above $85,000, anticipating that the rally had peaked and expecting a double top pattern to form. Contrary to these bearish bets, Bitcoin steadily pushed higher, breaching key resistance levels at $97,000 and then $105,000.

Several factors are driving this momentum, including a rebound in U.S. equities following easing trade tensions, increased institutional involvement—particularly on regulated platforms like CME—and a significant volume of short positions that have fueled a classic short squeeze.

These short positions paradoxically contribute to upward pressure, as forced liquidations and stop-loss triggers push the price higher, adding to the bullish momentum observed earlier this week.

Shorting near all-time highs is a typical market tactic, with traders entering positions around resistance points and placing stop losses just above to protect against rapid price spikes. For example, shorts initiated near $105,000 during multiple retests could have profited from subsequent pullbacks to around $102,000, while still limiting losses if stopped out at $109,000.

Notably, open interest in BTC derivatives surged disproportionately compared to price, climbing 17% in the last day despite a 4.8% price gain and millions liquidated. This indicates leverage-driven price action, raising concerns over the sustainability of the current breakout compared to previous surges above $100K.

As Bitcoin pushes beyond $111,000, the market will be watching closely to see if short sellers continue to pile in or if the existing short exposure provides fuel for further price advances through squeezes.