Bitcoin's Two-Week Short Squeeze Wiped Out $9.7 Billion Before Warsh's Jackson Hole Speech Reversed the Rally

Since Bitcoin's short squeeze first tore through the derivatives market on August 19-20, driving the price from an intraday low of $64,100 to more than $71,000, the damage to bearish traders has kept compounding. According to Crypto Briefing, roughly $9.71 billion in leveraged positions were liquidated across major exchanges over the following two weeks, with shorts accounting for the overwhelming majority of the losses.

The single worst day was August 19-20, when between $2.7 billion and $3 billion in positions were wiped out in one stretch, according to Crypto Briefing. That made it the largest concentrated liquidation of short positions since November 2021. More than $1 billion in shorts were erased in a single hour during the peak, and shorts made up roughly 92% of all liquidations during that window.

CoinGlass data cited by Crypto Briefing put Bitcoin shorts alone at $1.37 billion liquidated in the critical 24-hour period, with Ethereum shorts adding another $1.01 billion. K33 Head of Research Vetle Lunde, in a report titled "Altitude sickness can wait," noted the $1.37 billion single-day figure was nearly double the previous record of $757 million set in July 2021. A second wave liquidated another $739 million on August 21, Lunde wrote.

Binance took the heaviest single-session hit among exchanges at $518 million in liquidated shorts, followed by Hyperliquid at $513 million and Bybit at $303 million, according to Crypto Briefing.

The mechanical trigger was straightforward: traders who had built up short positions during weeks of sideways trading in the low-to-mid $60,000s got caught when the price broke out, triggering margin calls that forced exchanges to buy back into the rally, which pushed prices higher and triggered more margin calls.

Analysts see more than a squeeze

K33 and Bitwise analysts told clients the pattern goes beyond a simple positioning flush. Lunde pointed to Bitcoin's six-month 25-delta options skew turning negative for the first time since September 2025, meaning calls became more expensive than puts after eleven straight months of traders paying up for downside protection. He also noted Bitcoin reclaimed its 50-day, 100-day, 200-day, and 200-week moving averages within four days, something that had previously happened only in October 2015, April 2020, and October 2023, each near the start of a cyclical bull run, according to PrimeXBT's summary of the K33 research.

Spot Bitcoin ETFs pulled in net inflows of 31,740 BTC in the week following the squeeze, their strongest week since October 2025, per K33. The rally carried Bitcoin above $80,000 for the first time since May on August 25, according to Altcoin Buzz, which put the total crypto market cap at $2.68 trillion that day with the Fear and Greed Index reading 80, or "Extreme Greed."

But EdgeX Exchange flagged a counterpoint that any trader should weigh before calling this a durable trend reversal. The rally was driven substantially by forced buying, not organic spot demand, and "could reverse quickly if spot demand fails to absorb profit-taking supply once the leverage flush runs its course." That's precisely what appears to have started happening. Bitcoin has since fallen back below $77,000 following Fed Chair Kevin Warsh's hawkish Jackson Hole remarks, a reversal already reported in prior coverage of the speech and the accompanying jump in rate-hike odds.

Bessent's Treasury buybacks and the Fed-Treasury framing fight

Both PrimeXBT and IG tie part of the crypto rally to Treasury Secretary Scott Bessent's decision to at least double the size of long-dated Treasury bond buybacks, to $4 billion per operation, which IG reported sent the 30-year yield down nearly 10 basis points from its 22-year high of 5.33%. Reports have since surfaced that Treasury could tap its roughly $1 trillion Treasury General Account to fund even larger buybacks, according to PrimeXBT.

Breitbart's Business Digest pushed back directly on how outlets like the Wall Street Journal and Bloomberg have framed that move, arguing there is no real standoff between Bessent and Warsh. Breitbart notes the Journal suggested Warsh could leave Bessent "in even deeper trouble" if he doesn't help lower yields, while Bloomberg has described Treasury's buybacks as a form of quantitative easing. Breitbart counters that Bessent is exercising ordinary debt-management authority that belongs to Treasury, not monetary policy, and that Warsh can support the buybacks administratively while still holding a hawkish line on rates. That's a genuine framing dispute between named outlets, not a settled fact, and readers weighing Treasury's next move should watch whether Bessent expands the buyback program further, since that decision sits entirely within Treasury's own authority regardless of what the Fed does with rates.

The equity market backdrop

The crypto squeeze unfolded against a volatile stretch for stocks. Nvidia's earnings reignited AI-sector enthusiasm, and Salesforce and CrowdStrike beat expectations, with shares surging 22.58% and 20.58% respectively in the August 27 session, according to the Epoch Times. The Nasdaq gained 1.57% that day while the S&P 500, Dow, and Russell 2000 posted smaller gains.

But the strength didn't hold across the chip sector. Marvell fell nearly 10% on August 28 after missing inflated expectations, and weak results from SK Hynix and Samsung had already triggered a broader semiconductor selloff that dragged the iShares Semiconductor ETF down 2.67% in a single session, hitting Intel, Broadcom, and Micron along the way, per the Epoch Times.

Adding to the pressure, the Fed's preferred inflation gauge, the PCE price index, rose 3.7% annually in July, released August 26 and matching June's pace while coming in above the 3.6% consensus estimate, the Epoch Times reported. eToro's Bret Kenwell said the reading meant "inflation is still too high for comfort," while Edward Jones strategist Angelo Kourkafas said Warsh's Jackson Hole remarks left "the door open to additional rate hikes if inflation remains elevated."

Whether Bitcoin's four-moving-average reclaim and negative options skew mark the start of a genuine bull cycle, as K33 and Bitwise argue, or simply a leverage-driven spike that's already unwinding under renewed Fed hawkishness is now the open question heading into the Fed's September meeting.