Bitcoin: Understanding the Risks Behind BTC’s Leverage-Driven Price Surge

In recent times, leverage has quietly re-emerged as a significant force propelling Bitcoin’s [BTC] momentum. Notably, the recent surge triggered a pronounced short squeeze, prompting traders to rapidly close their bearish positions. According to data from Glassnode, this has resulted in the largest short-liquidation incident among the top 500 cryptocurrencies since October 10, 2025.

Key Takeaways

Leverage Reigns: Bitcoin’s current price surge is largely driven by leverage, with significant short liquidations recently.
Marketplace Dynamics: OG Bitcoin holders are reducing their selling pace, signaling a potential shift in market control and increasing price stability.
Whale Behavior: While whales are easing long exposure and shifting to shorts, retail traders are entering leveraged longs.
Volatility Risk: A reliance on leverage may increase market fragility and create risks for future price movements.
Sustainable Growth: For continued upward momentum, spot demand must replace leverage.

Bitcoin - Identifying the risks to BTC's leverage-driven price rally

As seen in the charts, spikes in liquidations closely aligned with Bitcoin’s rise to local highs.

Source: Glassnode

Massive losses in short exposure over a brief period forced buybacks that pushed Bitcoin’s price higher, reinforcing the upward momentum. This dynamic has been building since late 2025, with the intensity increasing as Bitcoin maintained elevated levels instead of pulling back. If current liquidation trends persist, Bitcoin could be on track to reach the $100,000-$105,000 range due purely to momentum. Conversely, if the funding cools and Open Interest resets, a price consolidation may occur. Historical short squeezes demonstrate that sustained growth often requires spot demand to take over from leverage.

Shift in Market Control Signals from OG Supply Pullback

The trend does not stop there. Original Bitcoin Holders (OGs) are no longer selling at the same rate seen earlier in the current market cycle. The STXO data, which tracks coins that have been inactive for over five years, indicates a notable decrease in spending by long-term holders. Information from CryptoQuant shows that OGs were quite active leading up to 2024, capitalizing on institutional demand and government purchases as ideal exit points.

However, that trend has recently changed. Previously, OG spending reached a peak of around 3,800 BTC, then dropped to 3,200 BTC, and subsequently fell further to 2,200 BTC.

Source: X

In the near term, reduced selling by OGs helps alleviate overhead supply, enhancing price stability. In the long run, this behavior reflects a strong conviction among holders. Historically, this restraint from OGs generally coincides with accumulation phases instead of selling off during the late-cycle.

Divergence Between Whales and Retail Traders

A chart has highlighted a clear divergence in trading behavior. Initially, whales are unwinding their long positions and subsequently moving into shorts—a strategic shift. Typically, when prices stabilize at high levels, momentum tends to decline, and leverage quietly rebuilds, skewing risk to the downside.

In this instance, however, whales took early action as they observed crowded positioning and late-cycle trading behavior. Furthermore, OG Bitcoin holders have ceased aggressive selling, which has isolated organic sell pressure while leaving leverage as the predominant market driver.

Source: X

In contrast, retail traders are moving in the opposite direction. They are chasing upward momentum and reacting to price fluctuations without considering structural trends. As a result, they are increasing their long positions as volatility expands. For instance, on-chain data from Alphractal indicated that while whales were closing longs and shifting to shorts as Bitcoin neared $69,000, retail traders were doing the opposite, increasing their leveraged longs. Shortly thereafter, Bitcoin suffered a nearly 20% correction, plummeting from $69,000 to $56,000 before stabilizing.

This setup suggests a forthcoming shakeout or cooling phase. If leverage unwinds, Bitcoin's price is likely to retrace before any sustainable growth can happen.

In summary, the current situation shows that Bitcoin’s price structure heavily relies on leverage rather than underlying market demand. Short liquidations have lifted prices, while OG selling has diminished and whales have become more defensive. This shift not only tightens the supply but also increases market fragility. Therefore, the prospect for further upside remains precarious; genuine and sustainable gains will require spot demand to compensate for the reliance on leverage. Without that, volatility risks linger, making the market's next moves uncertain.

Key Takeaways

Shift in Market Control Signals from OG Supply Pullback

Divergence Between Whales and Retail Traders

Concluding Thoughts