Bitcoin climbed above $85,000 on Monday, extending its recovery as a sharp short squeeze forced cryptocurrency traders who had bet on further declines to close their positions.
The cryptocurrency traded around $84,984 in the late European morning, up about 5% over 24 hours and above its Sept. 4 high of $82,284. The move marked Bitcoin’s strongest level since earlier this year.
According to data from Coinglass cited by CoinDesk, about $746.6 million in crypto positions were liquidated over 24 hours, including $647.9 million in short position. Bitcoin shorts accounted for $277.5 million of the liquidations, while Ether shorts represented another $122.8 million.
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The forced buying helped accelerate Bitcoin’s move higher. In a short squeeze, traders holding bearish leveraged positions can be forced to buy the asset to close their positions as prices rise, adding further upward pressure.
Market activity also increased sharply. Open interest rose 7.59% to $156 billion, even as large numbers of positions were liquidated, while 24-hour trading volume increased 39% to $224 billion. CoinDesk said the combination suggests traders were replacing liquidated positions rather than leaving the market.
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The broader cryptocurrency market also advanced. CoinDesk reported that 95 of the 100 constituents of its CoinDesk 100 index were higher, with the index gaining about 3% during the session.
The rally follows a volatile week for Bitcoin. The cryptocurrency had fallen to roughly $75,000 on Sept. 15 before recovering above $80,000 and then breaking through the $85,000 level.
CoinDesk’s market coverage also pointed to a broader improvement in risk sentiment, including developments around U.S. regulation of tokenized stocks and easing oil prices. However, the immediate driver of Monday’s move was the large-scale unwinding of bearish leveraged positions.