Until recently, investors looked at Bitcoin with great distrust. Now the situation is changing practically from hour to hour. Bitcoin just broke through $71,000continuing the sharp rebound that began the day before, and the Crypto Fear & Greed Index moved towards greed.
It’s more than just a single strong green candle. First, BTC broke out of multi-week consolidation, then it broke through 68,000 and 69,000. USD, then attacked the psychological border of 70 thousand. USD, and now buyers have pushed the rate above 71,000. USD.
The market is therefore sending a clear signal: something has changed. However, this does not automatically mean the return of the bull market. To understand what is really happening with Bitcoin, you need to separate the cause of the growth, the mechanisms that accelerated it, and what needs to happen next for the movement to prove sustainable.
What triggered Bitcoin’s rise?
The current rally cannot be honestly explained by one piece of news. A more likely mechanism is that several favorable factors emerged at a similar time and collectively changed the way investors perceive risk.
The first element was the macroeconomic environment. The US Treasury announced an increase in the scale of repurchase of long-term bonds from USD 2 to USD 4 billion. The market perceived this as a factor stabilizing the situation on the debt market, which also improved the sentiment in shares, gold and Bitcoin.
This does not mean that all of the market’s regulatory problems have suddenly disappeared. The Clarity Act still faces significant political obstacles. However, the short-term balance of information has changed: within several dozen hours, the market simultaneously received more favorable macroeconomic and regulatory signals.
This was enough to get the course started.
And then the market started to drive itself.
Short squeeze was the first stimulant
Before the increase, a large number of traders were betting on further declines in Bitcoin. They did this using short positions, i.e. the so-called shorts. To put it simply, a short makes money when the price falls and loses when it rises.
If a trader also uses high leverage, he or she does not need a gigantic increase in BTC to be in serious trouble. When the loss becomes too large to cover the position, the exchange automatically closes it.
In the case of a short, closing the position means having to purchase the asset.
And this is where the domino effect comes in:
Bitcoin starts to grow → shorts suffer losses → some positions are liquidated → liquidations generate BTC purchases → the price increases even more → more shorts are liquidated.
According to MarketWatch, short position liquidations exceeded $1 billion in about an hour. This is a lot even for the cryptocurrency market and explains well why the first part of the growth was so rapid.
But at $71,000, things start to get more interesting
Still at 68-69 thousand USD, it could be argued that we are primarily seeing a violent short squeeze. Forcibly closed positions generated demand, so Bitcoin could grow even without a large wave of new investors.
Breaking $71,000 doesn’t disprove this argument, but it weakens it.
Why? Short squeezes have limited fuel. Once the most at-risk positions are closed, the automatic purchases disappear. If normal demand does not materialize at this point, growth typically begins to slow down.
Meanwhile, Bitcoin first reached 70,000. USD, and then continued its movement and broke through 71,000. USD. Just a few hours earlier, around 71-71.5 thousand. USD was indicated as one of the next important technical areas for BTC.
This is where the real test begins.
The market must show whether the level of PLN 71,000 USD there are ready investors freely buy Bitcoin, or are we still primarily watching the end of the short liquidation mechanism and FOMO after a sharp breakout.
This is the most important question: who is buying now?
Let’s imagine two situations.
In the first one, Bitcoin increases from 64,000 to 71,000. USD primarily because traders betting on declines are forced to close their positions. The price goes up very quickly, but when the liquidations end, there are no new buyers.
Then growth may slow down just as quickly.
In the second scenario, a short squeeze starts the move, but then normal investors take over. Purchases on the spot market are increasing, institutional capital is emerging, ETFs are attracting money, and people who were previously waiting for the trend to be confirmed are starting to build positions.
Then the short squeeze isn’t the whole reason for the rally. It is only the spark that triggered a larger trend change.
For an investor, the difference between these scenarios is huge.
$70,000 isn’t just a round number
There is a lot of talk in the market about “supports” and “resistances”, sometimes giving them almost magical meanings. In reality, it’s all about the behavior of humans and algorithms.
Level 70 thousand USD was a psychological limit. Some investors could take profits there, others placed sell orders, and still others waited to buy until the breakout was confirmed.
If, despite this supply, the price goes higher and breaks through 71,000. USD, we get information that buyers were aggressive enough to absorb the emerging sell orders.
This does not mean that resistance has been defeated forever. Much more important than the temporary breakout itself will be whether Bitcoin can stay in this area.
A short jump to $71,200 and a quick return below $69,000. USD says something completely different about the market than a few hours or days of consolidation above 70-71 thousand. USD.
What would be the most positive scenario right now?
Paradoxically, Bitcoin does not have to immediately grow to 75 or 80 thousand. USD.
After such a sudden move, it would be very healthy to calm down the market. The price could move around 69-71 thousand for some time. USD, while investors would realize some of the profits and new buyers would gradually take over the available BTC.
If, despite taking profits, the market did not quickly return to the previous consolidation around 63-65 thousand. USD, this would be a sign that the structure is actually starting to change.
You can say it even simpler: After a strong increase, what is important is not only how high you managed to get, but also how little the market gives back to sellers later.
A strong market can sustain most of the growth generated. The weak one often makes a spectacular breakout, attracts late buyers, and then quickly returns to the starting point.
When would greed become a problem?
It would become more dangerous if the change in emotions began to significantly outpace the change in foundations.
Example? Bitcoin grows almost vertically in the following days, social media is flooded with forecasts of new records, investors massively open longs with high leverage, and people who did not want to buy BTC a week ago for PLN 64,000. USD, they start buying it aggressively at 75,000. USD solely for fear of missing out on the gains.
Then FOMO sets in.
And if too many long positions using leverage accumulate in the market at the same time, the exact opposite mechanism to the one that has just destroyed short sellers may arise.
The price starts to fall → longs are liquidated → liquidations cause automatic sales → the price falls even more → subsequent positions are liquidated.
Therefore, rapid growth in itself does not remove risk. It just changes his character.
Four things that are more important right now than Fear & Greed itself
The first one is maintaining the breakout. If BTC stays above the 69-70 thousand area USD, despite profit taking, the importance of the current move will clearly increase.
The second one is spot demand. It is worth observing whether investors are actually buying Bitcoin and not just speculating on contracts. The greater the share of normal shopping in traffic, the healthier its structure.
The third thing is ETFs. On August 18, U.S. spot Bitcoin ETFs recorded approximately $189 million in inflows. One day does not create a trend, but a series of positive sessions would be an important confirmation that capital using regulated investment products is also returning to the market.
The fourth element is lever. If, after liquidating shorts, investors immediately switch to the other side and start opening leveraged longs en masse, the market will again become susceptible to rapid position clearing.
Only the combination of these signals will allow us to assess whether the breakthrough of 71,000 USD is the beginning of a larger change or a spectacular but short-lived rebound.
What should an investor do?
A person who regularly buys Bitcoin under DCA does not have to change the entire strategy because BTC went from 64,000 to over 71,000 in just a few dozen hours. USD. The whole idea of DCA is to limit the influence of short-term emotions on decisions.
A much greater risk concerns people who did not want to buy a few days ago, but at PLN 71,000 USD are starting to feel like they “have to get in now.” This is the classic moment when the investment decision begins to be made not by analysis, but by FOMO.
Traders, in turn, received a very expensive reminder about the risk of leverage. More than a billion dollars of shorts liquidated in about an hour shows how quickly the market can punish a situation where too many participants get on the same side.
Bitcoin broke through $71,000. Now the more interesting part begins
The increase itself from around 64 thousand to over 71 thousand USD is impressive. However, what will happen after it will be even more important.
The first phase of the move had relatively easy to identify fuel: an improving macroeconomic and regulatory environment triggered the rally, and the liquidation of a huge number of shorts accelerated it rapidly.
Now this fuel will be less and less.
If, despite this, Bitcoin maintains 70-71 thousand USD, and new capital will continue to flow into the market, we will receive the first stronger argument that we are no longer just observing a short squeeze. The market could then move from a rapid recovery phase to a real attempt to build a new growth trend.
However, if demand disappears after the liquidation ends, the breakout can be quickly negated.
Therefore, the return of greed is interesting information, but not yet the answer. The big question is no longer why Bitcoin rose to $71,000. It reads: Who will be buying it above $71,000 when the short squeeze stops helping?
The answer to this question should tell us much more about the future direction of the market than the Fear & Greed Index itself.
