Bitcoin's most violent rally of its two-year drawdown was not powered by traders placing fresh bullish bets. It was powered by bears getting crushed, according to a new report from analytics firm Glassnode and crypto exchange Bybit, which analyzed derivatives and options market data through late August.

Over five days in August, Bitcoin climbed 24.6% even as coin-denominated open interest—a measure of active leverage, denominated in bitcoin so that rising prices cannot flatter the reading—fell 12.6%, the report found, meaning prices surged while leverage contracted. That combination is the tell: rather than traders piling into new long positions, the move ran on the forced unwinding of existing shorts. Liquidations are mechanical events: when a short moves against its holder, the exchange closes it out, effectively buying the asset back at market, and each forced buy adds pressure that can set off the next round. Roughly 64,000 BTC worth of open interest was closed out during the stretch, and short positions supplied 89% of every liquidated dollar.

The options market told the same story. Puts—the contracts traders buy to protect against a fall—had priced richer than calls for 361 straight days, a stretch of roughly a year in which downside protection commanded a premium. That put-call balance, known as skew, is one of the options market's standard gauges of defensive demand, and a single session ended the run, flipping the positioning as the market scrambled to reprice.

Meanwhile, Bybit's own volatility index traveled four times its normal daily range in one session, underscoring how abruptly options pricing moved. The front of the futures curve repriced sharply while longer-dated contracts barely moved—a sign the market read the move as a one-off event rather a lasting regime change.

A few caveats are worth stating plainly. The report is a joint Glassnode and Bybit collaboration, with figures as of the settled close of August 23. Glassnode's coverage spans four crypto-native options venues and excludes CME, the regulated US exchange popular with institutional traders, so the numbers describe the crypto-native market rather than every venue where Bitcoin trades.

The dynamic tracked in the report has not gone away. Bitcoin blasted back above $80,000 this week after the Federal Reserve paired its first rate hike since 2023 with a dovish forecast, setting off another round of forced liquidations—a reminder of how reactive leveraged positioning remains to macro headlines.

The surge triggered another squeeze, liquidating more than $230 million in Bitcoin shorts and over $445 million across the broader market in a single session. CoinGlass, which aggregates liquidation data across exchanges, showed roughly $529 million in total liquidations over 24 hours, with the majority once again coming from shorts.

The report's authors flagged the open question their own data raises: whether August's repricing will stick. A durable shift would show up as skew holding a call bid and the front of the curve staying firm. A return of put premium alongside fading funding would instead mark the move as an event the market absorbed, not a new regime it entered.