Bitcoin [BTC] has attempted to breach the $70k-mark twice in a week. Both attempts were met with rejection and accompanied by high volatility. A recent AMBCrypto report highlighted why a short squeeze was likely, despite the geopolitical tensions rattling the market.
Volatility was the highest it has been since 2022, and short-term holders continued to realize losses. Could this be paving the way for seller exhaustion?
Hope for long-term Bitcoin holders
The uncertainty in 2026 saw five weeks of sustained Bitcoin Spot ETF outflows, noted crypto analyst Axel Adler Jr. At the time of writing though, these had turned positive again.
This might be an encouraging development. Still, one weekly bar may not be enough to reverse the market’s fortunes.
The weekly supply in loss reached 46.3%, extending into the drawdown territory that has historically marked extreme market stress. Once again, it was not a sign that recovery is imminent.
It could take weeks and months to reach 60% or higher, which has marked the bottoms of the past two bear markets.
Sustained positive ETF flows and a fall in supply in loss would be a sign of market recovery.
Here’s why the volatility shouldn’t deter short-term buyers
Macro conditions certainly appear chaotic and fearful. And yet, Bitcoin has managed to defend the $60k-level twice in the past month. In recent days, it has made higher lows as it advanced towards the $70k ceiling.
According to Glassnode, this level has remained dominated by profit-taking, underscoring the potential fragility of the current demand.
The 7-day moving average of the taker buy/sell ratio rose above 1 on 25 February, and has stayed above 1 for most of the past week. This was another positive development, but the fragility remained.
A hike Open Interest showed speculators expected a breakout past $70k, one which hasn’t materialized yet.
There seemed to be a cluster of high leverage long liquidations from $65.2k to $67k too. However, the cumulative short liquidation leverage overhead was much higher than the long liquidation leverage.
In other words, a price move overhead would hunt down short liquidation levels, setting up a textbook short squeeze. Based on the evidence at hand, a move higher could be likely, but traders should remain cautious.
Final Summary
- Spurred by geopolitical tensions and rattled global markets, Bitcoin has been seeing its highest volatility levels since 2022.
- Supply in loss fell below 40%, showing significant stress among BTC holders, while weekly ETF netflows saw their first inflows.
