'Altitude sickness can wait': Bitcoin's historic short squeeze, Bessent catalyst may signal bull-market reset, analysts say

Bitcoin's historic short squeeze and a macro catalyst sparked by U.S. Treasury Secretary Scott Bessent may be signaling a broader bull-market reset after months of weakness, according to analysts at K33 and Bitwise.

Bitcoin gained 23% over the past week, its strongest one-week return since the post-election rally in November 2024, as activity rebounded across crypto markets. Spot and perpetual futures volumes jumped 188%, while CME volumes rose 152% and its annualized bitcoin futures basis climbed to 11.1%, the highest level since January 2025. Bitcoin exchange-traded products also recorded net inflows of 31,740 BTC, their strongest week since the October 2025 highs, K33 Head of Research Vetle Lunde noted in a new report titled "Altitude sickness can wait."

Much of the initial breakout came from forced buying, Lunde said. A record $1.37 billion in bitcoin shorts were liquidated on Aug. 19, nearly double the previous daily high of $757 million from July 2021, followed by another $739 million on Aug. 21, according to K33 data. The squeeze pushed notional perpetual futures open interest down to 284,000 BTC, its lowest level since May, while funding rates returned to neutral. Lunde noted that major short squeezes have historically occurred during bitcoin bottoming phases as bearish positioning becomes crowded and sell-side exhaustion reaches an extreme.

From short squeeze to broader market reset

Other market signals have shifted alongside the rally. Bitcoin's six-month 25-delta options skew turned negative for the first time since September 2025, meaning calls became more expensive than puts following 11 consecutive months in which traders paid a premium for downside protection. Lunde said previous flips in long-tenor skew have historically been reliable reversal signals in bitcoin's directional momentum. 

Bitcoin also reclaimed its 50-day, 100-day, 200-day, and 200-week moving averages in just four days, faster than any prior cycle, according to K33. The only previous occasions when it reclaimed all four within 45 days came in October 2015, April 2020, and October 2023, Lunde said, each around the beginning of a cyclical bull market.

The rally has also coincided with a changing macro backdrop. Lunde said Bessent's push to increase Treasury buybacks of long-term bonds signaled a willingness to intervene in the market and helped spark demand for scarce assets, with reports later emerging that the Treasury could use the nearly $1 trillion Treasury General Account to fund larger buybacks. 

Bitcoin and gold rose while equities fell, with bitcoin's 90-day correlation to gold climbing to 0.52, its highest since October 2020, as its Nasdaq correlation fell to 0.38, a one-year low, per K33. Lunde said the divergence was encouraging and argued that bitcoin could be well positioned if efforts to lower long-term U.S. yields escalate, while noting the cryptocurrency remains 36% below its all-time high.

Beyond the Treasury's bond-market intervention, Bitwise Chief Investment Officer Matt Hougan sees another Bessent-related catalyst reinforcing that setup. In a note to clients on Tuesday, Hougan highlighted Bessent's subsequent announcement of an "economic onslaught" against Iran's global financial connections, including threats to remove entities facilitating money laundering for Iran from the U.S. dollar system. 

Hougan argued that the two developments highlight separate parts of bitcoin's investment case: its scarcity as governments seek to push down long-term borrowing costs and its role as a globally transferable monetary asset outside the banking system of any single country. 

"The more the global financial system becomes a tool of geopolitical power, the more valuable a neutral financial network becomes," he said.