Bitcoin [BTC] entered late January with elevated leverage as Open Interest (OI) hovered near $31–$32 billion while the price traded around $90,000. Gradually, derivatives exposure began easing as risk sentiment weakened, pushing OI toward $28 billion while price drifted lower.
Soon after, geopolitical headlines around Iran escalated uncertainty, and Bitcoin quickly dropped toward the $63,000 zone. During this decline, OI collapsed from roughly $29 billion to nearly $21 billion, signaling a broad leveraged flush.
Source: CryptoQuant
At the same time, the Coinbase Premium Index remained deeply negative, falling near −0.25 as U.S. spot demand weakened. However, selling pressure slowly stabilized as the price consolidated between $65,000 and $68,000.
Source: CryptoQuant
Meanwhile, derivatives positioning stayed compressed near $21–$22 billion, indicating reduced speculative exposure across exchanges. As March approached, conditions began shifting as the Coinbase Premium Index moved back toward neutral levels.
Shortly afterward, Bitcoin rebounded sharply above $73,000 while OI surged toward $24.7 billion. This combination suggests short covering entered the market, turning the geopolitical shock into liquidity for the rebound.
Altcoins surge as liquidity shifts beyond Bitcoin
Following the earlier rebound phase, market attention gradually shifted toward higher-beta assets. As volatility eased, traders began reallocating capital to altcoins that typically react more quickly once stability returns.
Within this rotation, several major altcoins quickly outperformed. Solana [SOL] climbed about +9% in a day, signaling renewed speculative appetite.
At the same time, Chainlink [LINK] advanced roughly +7%, reinforcing the shift toward liquid large-cap alternatives. Meanwhile, Hyperliquid [HYPE] posted nearly +12% over the seven days, showing sustained accumulation rather than a short-lived bounce.
Source: Santiment
However, broader sentiment still reflected lingering geopolitical fear. Many retail participants had already exited positions during the earlier panic selling triggered by macro headlines. This behavior reduced immediate sell-side liquidity across several altcoin markets.
As a result, even moderate inflows began pushing prices higher. Traders increasingly targeted assets with stronger short-term upside potential.
Taken together, extreme fear first forced weak hands to exit. Once stability returned, that same liquidity rotated into altcoins, allowing Solana, Chainlink, and Hyperliquid to outperform during the recovery phase.
Derivatives short squeeze strengthens Bitcoin’s rally
Bitcoin’s latest rally gained momentum as derivative markets triggered a sharp short squeeze. At press time, total crypto liquidations reached roughly $587.97 million in 24 hours.
Within this surge, Bitcoin accounted for almost $310 million, highlighting its dominant role in the move.
Source: CoinGlass
More importantly, short positions drove most of the liquidations. Around $272.75 million came from short closures, while longs represented only $36.21 million.
As prices pushed higher, bearish traders rushed to cover positions.
Source: CoinGlass
This forced buying gradually intensified upward pressure. As liquidations cascaded, momentum traders entered the market seeking short-term upside.
At the same time, rising volatility reinforced speculative activity across derivatives exchanges. Through this sequence, short covering transformed a normal rebound into a stronger rally.
Short liquidations, therefore, acted as the primary fuel behind Bitcoin’s upward acceleration, turning bearish positioning into forced demand and amplifying the rally’s momentum.
