Glassnode: Bitcoin begins to recover after record short-term liquidations, facing a critical test between $83 million and $86 million

On August 19, 2026, the largest single-day short squeeze event in history occurred. According to Glassnode's records since 2019, around 85% of liquidation positions were concentrated in short positions. This liquidation absorbed about 86% of the model-predicted liquidation clusters along its direct path, effectively reducing market leverage instead of attracting new speculation. In terms of token count, futures open interest declined by 11%, while perpetual contracts' funding rates remained close to neutral levels, occasionally even dipping negative, confirming that leveraged long chasing did not take place.

Robust institutional demand supported this trend. US spot Bitcoin ETF absorbed $223 million in capital during the squeeze period, with no outflows, setting the strongest seven-day inflow record since 2026. Although its daily transaction volume was $240 million—about half of the January and February volume—the consistently stable inflows indicated sustained market participation, rather than a fleeting surge.

On-chain transaction data shows that Bitcoin supply is synchronously shifting from private whale wallets to institutional channels. Since the low on June 30, entities holding 1,000 to 10,000 Bitcoin have distributed about 50,500 Bitcoin, while the largest group (including exchanges, custodians, and ETF issuers) absorbed 59,100 Bitcoin during the same period. During the squeeze week alone, custodians added 31,500 Bitcoin, which matches the ETF issuance for that week. Widespread accumulation of Bitcoin further confirms this demand, as since August 5, all six wallet-size groups have maintained an accumulation trend score of 0.5 or higher for 20 consecutive days—a duration of broad accumulation not seen since the end of 2024.

Cycle Position and Top Resistance

Glassnode's cyclical composite index (containing 45 indicators) has returned to a neutral level of 40 after seven months of stagnation, indicating that market recovery is still in its early stages. This round of growth has been led by large-cap assets, which have surged by 20.6% over the past month, while small-cap assets only rose 6.0%—a typical early-stage recovery feature, when capital tends to prefer liquidity. Bitcoin has also decoupled from traditional markets, rising 25% during the squeeze while the S&P 500 fell by 1.7%, bringing their monthly correlation close to zero. Although historically such decoupling tends to revert to the mean within weeks, the quarterly correlation is already beginning to decline.

Currently, several technical structures converge between $81,000 and $86,000. This region includes the first major long-term holder cost basis support ($80,800), dealer gamma flip ($82,300), survival short squeeze clusters, and a large volume of patient supply. If closing prices remain above $83,300, it indicates these support levels are being absorbed. Direct support lies at the short-term holder cost basis of $70,000, while deeper support is in the $62,000 to $65,000 range, bolstered by recent buying. If price falls back to the squeeze starting point of $62,900, the entire squeeze process will come to an end.

The options market reflects this stalemate. The largest risk zone for expiring options contracts is $69,000 to $70,000, while the forward distribution for September 25 shows 70% of implied outcomes fall between $69,000 and $89,700. The derivatives market expects prices to remain in a consolidation phase rather than a directional breakout, making the $81,000 to $86,000 range crucial in testing whether the recovery can continue.