Overnight, Bitcoin suddenly rallied. A single candle of more than 7% shot straight from the 81k zone to 87k, marking a new high for this rebound that began in late August. The market erupted in celebration. Some pounded their chests over missed opportunities, some scrambled to reposition, some smugly patted themselves on the back.
This move was a pure cascade of short liquidations — what is commonly called a short squeeze.
The CLARITY Act failed to pass. The Fed restarted rate hikes last week. The Bank of Japan pushed rates to 1.25%, a 31-year high. Under normal circumstances, any one of these three would be a textbook bearish headline. Yet Bitcoin not only failed to drop — it broke upward right at this level.
When bad news fails to translate into a price drop, there is usually only one reason: there are simply too many, too thick, short positions.
And it is precisely the thick fog of bearish news that draws the snakes out of their holes, luring so many, so heavy, short positions into opening up.
The fattest prey is exactly what the most tempting bad news creates.
An earlier analysis, “Bulls Never Die, the Pullback Never Ends,” captured the core idea: bulls were never the cause of the market’s rise, but the fuel for its fall. As long as the bulls live, the pullback never ends.
Now it is the shorts standing in that same spot. Shorts were never the cause of the market’s fall, but the fuel for its rise. As long as the shorts live, the explosive rally never stops.
Counterintuitive, inverse thinking.
The rally blows up the shorts. The shorts blown up by the rally go right back in with new shorts, betting on a pullback after the surge. The market keeps rallying higher, blowing up even higher short positions. This loop repeats, until they have exhausted their last bullet.
People who keep getting liquidated and coming back are affectionately known as “degen gamblers.”
The degen gambler has three behavioral traits:
First, they rush in to open shorts during a sharp rally. The higher the price, the more unreasonable they find the move, the more they feel compelled to short. Among all contrarian trades, this is the easiest one to get sucked into.
Second, they open new shorts after being liquidated. One loss is not a cue to admit defeat and leave; it is a reason to double down and bet again that the market will reverse. They are betting that a violent rally must be followed by a rapid fall, so they can win back what they lost on the short.
Third, they never think they are gambling. In their eyes, this is judgment, this is discipline, this is being greedy when others are fearful.
The tragedy lies exactly here: as long as the degen gamblers live, the short positions will never be fully cleared, and the rally will never end — until the vast majority of them have been liquidated to the bone, and only then does the market relent.
The market data confirms exactly this.
Start with the funding rate. After that overnight candle, Binance perpetual funding rate closed at 0.007%, while 0.01% is the neutral line for this type of contract. In other words, a +7% candle failed to push the funding rate up at all.
The funding rate is the thermometer of leveraged longs. If longs were genuinely chasing the rally and adding leverage, this number would spike immediately. The fact that it lies flat below the neutral line tells us only one thing: this rally’s buying was not from leveraged longs.
So where did the buying come from?
Look at open interest. Yesterday at 14:00, holdings stood at 108,931 BTC; over the hours after the rally, that number climbed all the way to 111,704 BTC by 21:00. The higher the price rose, the more positions piled on. That means, during the upward breakout, the people opening shorts did not decrease — they accelerated to fill in.
By the early hours of today, open interest had slipped from 111,704 BTC back to 108,950 BTC — about 2,750 BTC of positions were closed. That batch was the shorts sent off by this candle.
Finally, look at the long/short account ratio. This number has been hovering around 0.89 — meaning there are consistently more accounts short than long. The price rose 7%, yet more people turned bearish.
The shorts are pushing the price up with their own money.
Put the above datasets together and the mechanism becomes clear.
When the price rises, the shorts’ floating losses widen. Once the loss reaches a point where margin is insufficient, the exchange force-liquidates. The act of liquidation itself is a buy. A crowd of forced-buy orders pile up, pushing the price higher; the higher the price, the more shorts get pushed into the liquidation zone.
This becomes a loop that bites its own tail. The buying did not come from the longs — it was surrendered by the shorts as they were force-liquidated. The shorts used their own margin to push the price higher, and then got blown up again right there.
Glassnode’s analysis published the previous weekend [1] pointed out that the epic rally from 64k to 80k in late August came almost entirely from short liquidations, not long accumulation. The report’s literal conclusion: the strongest rally in two years was fueled by the shorts’ own liquidation orders. This 7% candle today is the second act of the same script.
As one analysis put it not long ago: “Misfortune is where fortune rests. The shorts pressing down on Bitcoin, once loosened, become a floor; once they cascade into a short squeeze, they become the fuel for the rally.”
The new batch of shorts that piled in yesterday afternoon and evening mostly opened positions around 86k–87k. They bet that after the explosive rally the price would quickly fall back. If the price keeps climbing, the floating losses on this batch deepen — and that 7,000 BTC of concentrated adding at 21:00 yesterday turns into fresh fuel hanging over the market’s head.
New shorts entering also means there are indeed people in the market betting this is the top. Some chase the rise and get their longs blown up on a pullback; some chase the fall and get their shorts blown up on a rally. Clear a batch, another arrives, looping repeatedly until one side’s strength is exhausted.
Overnight, this candle not only cleanly broke Bitcoin away from the 30-day moving average (currently 79k) on the technical side, but more importantly freed it from the stickiness of the 50-week moving average (currently 78k) that it had been tangled with for weeks, definitively confirming the breakout above the 50-week line.
Looking up, the next line overhead is the 100-week moving average, currently around 89.6k. In other words, this breakout aims to break 8 and set its sights on 9.
Guessing from price structure, the 100-week moving average may be the first natural resistance the market meets here. The height of a short-squeeze move is determined by the depth of short positions, not by fundamentals. When the shorts are blown out, the price could be 88k, could be 95k, or even higher. It explains direction, not target.
So when will this short squeeze end?
Perhaps the answer is not in the price, but in two numbers.
First, open interest begins to fall rapidly. That means the shorts have finally admitted defeat and exited, no longer continuously feeding in new short orders. The fuel has hit bottom.
Second, the funding rate turns clearly positive. That means leveraged longs have begun to take over the buying, and the market’s driving force has shifted from passive liquidation to active longs. At that point, the nature of the rally changes.
Right now, neither has happened. Open interest remains steady at a high level; the funding rate still lies below the neutral line.
The shorts are still alive, chips still being added, fuel not yet spent.
Every short squeeze in history kills the same kind of degen gambler, but never the same people. As the old saying goes: the flowers look alike year after year, but the people are different from year to year.
Not because they got the direction wrong, but because they refused to admit defeat. The market’s greatest skill is sending those who refuse to admit defeat out of the game, wave after wave.
The degen gamblers never disappear; they are merely temporarily drained. As long as they live and are willing to keep opening positions, the market has an inexhaustible supply of raw material.
They step onto the field, see red, lose the free will of a human being, and become walking corpses, their bodies moving to the rhythm of the K-line.
References
- [1] Glassnode, on-chain analysis (published the weekend of September 19–20, 2026): the late-August rally from 64k to 80k was driven almost entirely by short liquidations rather than long accumulation — the strongest rally in two years was fueled by the shorts’ own liquidation orders.