Summary: This wave of rally has gradually evolved from a pure short squeeze rebound into a market supported by spot buying and ETF fund inflows, but the time above the previous high is still too short and volume has not significantly increased. Whether the profit-taking test has truly passed remains to be observed.
The structure leans healthy, but whether the "trend is solid" still requires confirmation through continued spot buying, further volume expansion, and whether key support holds during pullbacks.
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Bitcoin surged from 63K to 77K last week, pulled back briefly, then broke through again in the past two days to stand above 79K, setting a new high for this rebound. As discussed earlier, this rally began as a short squeeze—short positions were heavily forced to close—but funding rates did not rise accordingly at the time, and most chips remained on exchanges. It resembled a typical short squeeze rebound rather than an established trend.
However, things changed. Real buying started entering around 8/20. What happened from 8/20 until now? Below are the on-chain observations so far.
📅 After 8/20: Real Spot Buying Enters
After the short squeeze, signals clearly strengthened. The Bitcoin ETF Netflow chart shows several days with significantly larger single-day net inflows, a scale rarely seen recently, indicating institutional buying has clearly warmed up.
At the same time, Total Exchange Outflow (30-day average) for both spot and derivatives exchanges began climbing from 8/18, rising to a high around 8/20, moving in sync with the price rally from 63K to 73K. This period indeed saw large amounts of Bitcoin withdrawn from exchanges, not merely leveraged positioning. This is the clearest dividing line between judging a "short squeeze" versus "real buying."
However, note that after the weekend, the average outflow for both exchange types retreated from their highs—spot exchanges declined from near their peak, and derivatives exchanges weakened in tandem, even as prices continued to edge higher. Withdrawal momentum has slowed in recent days, suggesting a slight increase in selling pressure or profit-taking. This will be revisited in the observation list below.
One more piece of supporting evidence: The URPD (supply distribution) chart shows a clear supply cluster in the $76-78K range, sitting just below the current spot price of $78,564 and still in profit. This cluster formed rapidly only after the 20th. It indicates that a batch of chips was indeed acquired in this price zone and remains on-chain, rather than being purely internal exchange leverage activity. This aligns with the earlier observations of amplified ETF net inflows and rising exchange withdrawals, further supporting the judgment that "real buying has entered this rally."
📒 Profit-Taking Test: Still Ongoing
As the price retook the short-term holder cost basis (around 67K) and the realized cost of newly entered whales (around 68.9-70K), this previously underwater supply turned into profit-taking—on 8/20 alone, roughly $614 million was realized, a record high. This was a critical demand test: if new buying can absorb this selling pressure and price holds the cost zone, it signals a true structural shift to strength. Although the price has reclaimed the previous high (around 79.3K), it has spent very little time above this level and volume has not expanded meaningfully to accompany it. It resembles a "low-volume rally," insufficient to conclude that the profit-taking test has passed.
👀 What to Watch Now
With the price breaking above the prior high, the original whale cost zone (67-70K) has shifted from a "resistance test line" to a "key support observation area" on pullbacks. Going forward, continue tracking:
1️⃣ Whether withdrawal momentum from spot and derivatives exchanges can rebound—the post-weekend averages for both have retreated from highs; if they continue weakening, it indicates cooling buying and withdrawal willingness
2️⃣ Whether exchange reserves will turn back to outflows—before this rebound, reserves had only just broken a two-year downtrend and reclaimed the 200-day moving average; a return to outflows would reaffirm the long-term supply contraction narrative
3️⃣ Whether price can hold the 67-70K cost zone and the newly formed 76-78K supply cluster on pullbacks; a break below could revive earlier short-squeeze concerns.
(Data source: Crypto Mommy @ CryptoQuant)
✏️ One-Sentence Summary
This wave of rally has gradually evolved from a pure short squeeze rebound into a market supported by spot buying and ETF fund flows, but the time above the previous high is still too short and volume has not significantly increased. Whether the profit-taking test has truly passed remains to be observed.
The structure leans healthy, but whether the "trend is solid" still requires confirmation through continued spot buying, further volume expansion, and whether key support holds during pullbacks.
⚠️ The above is on-chain data observation, not investment advice.