Bitcoin’s (BTC) recent rally has sharply reduced leverage across the market while attracting strong institutional demand, according to Glassnode.
Bitcoin short liquidations trigger major deleveraging and ETF demand
In a report on Wednesday, the firm stated that August 19 marked the largest single-day short liquidations recorded by Glassnode’s feed since 2019, with short positions accounting for 85% of all liquidations.
While the data covers major centralized exchanges, it excludes Hyperliquid, suggesting that the actual liquidation total was higher.
The squeeze also sharply reduced leverage, with futures open interest down 11% in coin terms, although the dollar value of the futures market increased because of Bitcoin’s price appreciation.
Liquidated short positions were not replaced by new contracts, suggesting that the move was driven by deleveraging rather than a fresh buildup of speculative positions.
Funding rates also remained subdued throughout the rally. Perpetual funding stayed close to neutral and occasionally turned negative after the move. Glassnode described the rally as a “stop-cluster flush,” adding that the funding data showed neither a crowded short position before the rally nor an aggressive long chase afterward.
“A rebuilding coin book alongside rising funding would be the first sign that leverage is crowding back into the move,” Glassnode wrote.
The rebound was further strengthened as capital flowed back into US spot exchange-traded funds (ETFs). The funds recorded $2.23 billion in net inflows during the squeeze window, with no single day of outflows.
This represented the strongest seven-day intake of the year, while the largest single-day inflow was the biggest creation since January 14. Strong spot demand from fresh buyers has now pushed the Short-Term Holder Cost Basis to $70,000.
Bitcoin’s recovery was also accompanied by a shift in coin distribution among larger entities. Since the June 30 low, investors holding between 1,000 and 10,000 BTC reduced their positions by 50,500 BTC.
The cohort with more than 100,000 BTC absorbed the supply increase, including exchanges, custodians and ETF wrappers. This batch of holders took in 59,100 BTC over the period.
Bitcoin set to face strong resistance above $80,000
Bitcoin also decoupled from US equities during the move. Over the squeeze window, BTC gained 25% while the S&P 500 declined 1.7%, pushing the one-month return correlation between the two toward zero.
“Fast-window breaks like this mean-reverted within weeks twice in 2025, so the de-correlation is not yet structural; the slower quarterly window has only rolled over,” Glassnode added.
Despite the positive price movement, Glassnode identified $83,000-$86,000 as the key overhead supply zone, while support from recent buyers sits around $62,000-$65,000.
“Every overhead structure we track now sits between $81K and $86K; that band is where the recovery’s demand meets its test,”
BTC is trading at $78,780, down 0.6% in the past 24 hours at the time of writing.
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