Bitcoin's sharp surge in August was driven by liquidations of short positions rather than new bullish bets.

Blockchain outlet Decrypt reported on Aug. 19 that a joint report by on-chain analytics platform Glassnode and Bybit found open interest fell 12.6 percent as bitcoin rose 24.6 percent over five days in August.

That means the move was amplified by forced closures of existing short positions rather than traders building new long positions. About 64,000 BTC of open interest was liquidated over the period, and 89 percent of dollar-denominated liquidations came from short positions.

The options market showed the same pattern. Put options, used as downside protection, had been priced higher than calls for 361 consecutive days, but that flipped in a single day. The market repriced nearly a year of bearish positioning at once.

The futures market structure also suggested it was hard to view this as a long-term trend reversal. Bybit's volatility index moved to about four times its usual daily range in a single day. The futures curve was sharply readjusted only at the short end, while the long end barely moved. The report said this was a signal the market viewed the move as a one-off event rather than a sustained regime change.

The analysis has limits. The data cut-off was the Aug. 23 close, and Glassnode's tally covered four crypto-native options venues excluding the Chicago Mercantile Exchange. The figures therefore more closely reflect flows in crypto-native markets than the broader market where bitcoin trades.

This structure has continued recently. Bitcoin this week rose above $81,000 again, and another short squeeze occurred after the U.S. Federal Reserve delivered its first rate hike since 2023 along with a dovish outlook. In that process, more than $230 million of bitcoin short positions were liquidated in a single session, and total market liquidations exceeded $445 million.

Based on Coinglass data, total liquidations over 24 hours were about $529 million, with many again coming from short positions. The rebound has continued, but it means it has not yet been confirmed whether funds have shifted to a long-term bullish stance.

The remaining point to watch is whether August's price repricing holds. The report said it can be seen as a structural shift only if call-option demand remains dominant and the short end of the futures curve stays firm. If put-option premiums build again and funding strength weakens, it could add weight to the view that the market merely absorbed a one-off shock.

Read our latest joint report with Bybit on the state of crypto derivatives https://t.co/yDQHkdrIe7