Bitcoin could retest $90,000 after short squeeze; leverage build-up raises reversal risk

Bitcoin surged on September 22 after clearing the key $82,000 resistance, topping out at $87,300. The move sparked a wave of short covering and liquidated about $750 million in bearish crypto derivatives positions, adding fuel to the rally. Leverage is quickly returning. Since the breakout, Bitcoin derivatives open interest has climbed by roughly $2 billion, pointing to a rapid rebuild of leveraged positioning. Nansen analyst Nicolai Sondergaard said the market is "turning bullish faster than position changes." Flows in U.S. spot Bitcoin ETFs have been volatile. The group saw combined outflows of $746 million on Tuesday and Wednesday, tied to delays around the CLARITY Act and Federal Reserve rate hikes, before reversing to inflows of $160 million on Thursday and $433 million on Friday. The average cost basis for U.S. BTC ETF holders is estimated at about $82,200; with Bitcoin trading above that level, ETF investors in aggregate have moved back into profit. On technical levels, Sondergaard flagged $87,000 as the next key zone, with $90,000 and around $92,000 as subsequent targets. Wintermute trader Jasper De Maere also said Bitcoin could test $90,000, while warning that despite the constructive signal from a break above the 50-week moving average, sharp short-term volatility remains possible. Focus is now on whether spot buying and ETF demand can sustain the advance. Sondergaard cautioned that if spot demand fails to keep up with the expansion in derivatives leverage, the rally could become leverage-driven and vulnerable to a sudden pullback, especially if U.S. Treasury yields rise further or geopolitical shocks hit risk assets. Wintermute advised watching ETF flows, perpetual futures open interest and funding rates in the coming days, along with option expiries this Friday.