Bitcoin Under High Leverage: A Rebound or a Trap?

Large holders accumulate while retail investors flee; who is footing the bill for this bull market?

Written by: Ashrith Rao

Compiled by: Saoirse, Foresight News

Last week, Bitcoin's price surged to $81,500, signaling a shift in market sentiment. However, a closer look at the data reveals that the current market is heavily reliant on leverage, lacking a clear trend, and investor confidence remains shaky.

The data paints a vivid picture: in just seven days, the total market capitalization of cryptocurrencies skyrocketed from $2.21 trillion to $2.64 trillion. According to ChainCatcher, the previously sluggish daily trading volume of $40 billion surged to $162 billion. The Grayscale Bitcoin Trust saw call options trading volume exceed 1 million contracts for three consecutive trading days, setting a historical high of 1.58 million contracts. Traders are betting on a bullish market, increasing their investments, with the 25-Delta call skew turning positive for the first time since October 2025. It seems the bulls are celebrating a comprehensive victory.

Then, an attack occurred on Alarak Island. On Sunday, Iran retaliated against the U.S. for striking Iranian rocket launch sites near the Strait of Hormuz by launching missiles at a U.S. military base in Jordan.

Bitcoin plummeted sharply from its Sunday high, dropping below $77,000. This crash triggered massive sell-offs, causing the cryptocurrency market to lose billions in value. Approximately $400 million in long leveraged positions were liquidated. While geopolitical turmoil is the apparent main cause, this is merely a superficial interpretation.

The core argument of this article: the so-called "recovery" is fundamentally precarious.

Macroeconomic Background

Even before the weekend conflict erupted, signals regarding the Federal Reserve's policy outlook had already been released. At the Jackson Hole Economic Symposium, Fed Chair Kevin Warsh hinted that if inflation does not fall back to the 2% target, further rate hikes cannot be ruled out.

The market reacted sharply. The probability of a rate hike in September rose to 56.9%. In just one trading day, the yield on the 2-year U.S. Treasury rose by 12.8 basis points to 4.36%.

Such macroeconomic headwinds can have a significant impact on risk assets, and the Iranian attack occurred in an already fragile environment.

The chain reaction is clear: the market is worried about oil supply in the Strait of Hormuz, pushing oil prices up to $90 per barrel, reigniting inflation concerns. Investor risk aversion is rising, expectations for rate hikes are further solidified, and the dollar strengthens. Cryptocurrencies, known for their high volatility, bear the brunt of the market's shock.

Structural Divergence Within the Market

Internal market indicators are also sending warning signals.

This is a turning point worth noting. The market capitalization of stablecoins is the most reliable indicator of new fiat money flowing into the crypto ecosystem, and this indicator has shown almost no fluctuation. Only USDC has seen a slight increase.

Data from ChainCatcher shows that the stablecoin expansion seen during the bull market of 2024-2025 is no longer visible; back then, USDT's market cap expanded significantly from $120 billion to $196 billion. The current price increase is not due to new capital entering the market but rather a reallocation of existing funds through leverage.

As the weekend approached, the Crypto Fear and Greed Index reached 62, indicating a state of greed. This means that after Bitcoin rebounded 31% from its low, the outlook is not optimistic. When investors aggressively go long at resistance levels and fall into greed, they expose themselves to various risks. The behavior of large holders and ordinary retail investors is markedly divergent. In less than 60 days, large holding addresses accumulated an additional 46,420 Bitcoins; in just seven days, large holders bought approximately 39,000 Bitcoins.

Ordinary investors holding 0.1-1 Bitcoin have an accumulated trend score of -0.982, indicating they are almost entirely in a selling position. Large holders continue to accumulate, while small and medium investors are exiting the market.

This is not a signal of market strength. The article argues that this round of price increase is a strategic operation by large holders, aimed at flushing out latecomers and weak-willed investors.

The Real Test

At the time of publication, Bitcoin's price was around $77,600.

Source: CoinGecko

TradingView data shows that the price has fallen below the key resistance range of $78,000-$82,000, which was previously seen as a significant pressure point. Short-term support is seen at $76,000-$77,000; if this support fails, the price may drop to $70,000-$72,000.

SoSoValue data indicates that the buying interest in put options remains low, and the sentiment in the options market is still somewhat optimistic. However, the real test will be whether Bitcoin ETFs can attract capital inflows again after the U.S. market opens.

The spot Bitcoin ETF had seen significant net inflows for nine consecutive days, but last Friday, there was a $202 million outflow. If this trend continues, it indicates that institutional buying interest is not sufficient.

The current market is dominated by leveraged derivatives rather than real spot demand. The average daily trading volume of $109 billion looks impressive, but if the stablecoin market does not expand simultaneously, the trading volume lacks substantive meaning. This round of price increase is likely just a short-term pulse, not a return to the sustained capital inflows seen from August 2024 to October 2025.

Other Technical Indicator Signals

TradingView's comprehensive moving averages, oscillators, and pivot points provide a buy signal for Bitcoin's technical analysis for next week.

Source: TradingView

Both short-term and long-term indicators also point to a buy signal.

Additionally, InvestTech's algorithmic rating is "positive," but the 1-6 week outlook is rated as "weakly positive."

The agency notes: "Bitcoin is currently operating in a near-level oscillation channel, indicating that the market will continue in its current direction. The lower support is at $63,000, and the upper resistance is at $80,400. Trading volume is positively balanced, with higher trading volume on up days and shrinking volume on down days, providing support for the price. After a significant increase, the RSI indicator has surpassed 70."

Source: InvestTech

InvestTech adds: "The upward momentum of the cryptocurrency is strong, with the possibility of further upside. However, for large-cap assets, a high RSI indicates overbought conditions, posing a risk of correction. Overall assessment shows that the short-term technical outlook is slightly tilted towards the positive.