Bitcoin's True Driver Behind This Rally: Short Squeeze Grabbed Headlines, But Spot ETFs Are the Real Foundation

Headline: Short squeeze driven by longs, but the trend is determined by new buying interest

A tweet from WatcherGuru about Bitcoin returning to $75,000 is more than just news—it’s a sentiment inflection point. Combined with short covering, approximately $450 million in shorts were liquidated within 24 hours. The comment section is a heated debate: longs believe the “panic clearing” is over, while skeptics point out that the price falling back below $74,400 indicates a mechanical rebound lacking new capital. The buzz on Twitter has popularized the term “digital gold,” with Markus Thielen from 10x Research explaining from an options perspective: the closing of puts near $60,000 forces market makers to buy spot, pushing the price higher. This mechanism is sound, but he overlooks a more important factor: last week’s net inflow into spot ETFs was $767 million. The real support at the bottom comes from institutional buying, not passive derivatives play.

On-chain and market data signals are “cautiously optimistic but with overheating risks”:

• MVRV=1.376, in the “reasonable slightly elevated” zone, not yet euphoric.
• NUPL=0.274, profit-taking dominates but greed hasn’t taken hold.
• Whales (holding 10–10,000 BTC) control 68.17% of supply; continued accumulation could sustain the trend.
• Daily MACD shows a bullish crossover, price above 20-day moving average ($69,578); but 4-hour RSI=68.6, nearing overbought.
• Macro factors: oil price fluctuations and policy rates at 3.5–3.75% have diminishing marginal impact; when Brent hit $103, Bitcoin outperformed US stocks by about 4%.

More details on sentiment and capital:

• Sentiment inflection: Fear & Greed Index rose from extreme fear (8–15) to 27; retail investors are starting to buy the dip, while institutions are still not fully “long.”
• Narrative divergence: Rick Maeda from Presto attributes the rally to ETF inflows and treasury buying, correcting the “pure squeeze” view. But if funding rates (currently around 0.1%, neutral) turn negative, the $101 billion open interest could trigger reverse deleveraging.
• Structural signals: 52% of liquidations are from shorts ($119 million vs $62 million longs), confirming the squeeze aspect; NVT=21.6 is relatively low, indicating fundamentals support a higher bottom; retracements below $70,000 are attractive for entry.
• Altcoin correlation: ETH up over 3%, XRP about 5%, mostly following Bitcoin; no supporting spot inflows for independent moves.

Institutional capital is the main driver; the squeeze itself is not

This “viral” tweet reshapes the market narrative, with different camps drawing different conclusions based on their signals. The table below compares key viewpoints and my assessment:

In summary, derivatives explain “how it went up,” while capital flows explain “why it can hold.” Thielen et al. captured the technical squeeze but overlooked the more powerful marginal variable: spot inflows.

Summary

• Core view: Net inflow into spot ETFs forms the demand base; the squeeze is just an amplifier.
• Timing: Short-term overheating suggests a pullback; below $70K offers good entry points.
• Structure: Continued accumulation by whales and institutions increases the likelihood of upward price movement rather than a full retracement.
• Risks: Negative funding rates combined with high open interest could trigger deleveraging waves; monitor inflows and leverage dynamics.

Bottom line: If you chase the rally solely based on the squeeze, you’re more vulnerable to a reversal below $74,000. In the medium to long term, institutions and long-term holders have the advantage. Focus on “capital inflows,” not just macro headlines.

Conclusion: It’s too late to chase the squeeze. The real advantage lies with long-term holders and institutional capital increasing their spot positions. Traders should wait for retracements and confirmation of funding rates before participating.