Short Squeeze Hits Top 500 Cryptos As Traders Unwind Bearish Bets (2026)

Crypto markets saw the biggest short squeeze since October as short positions were liquidated and Bitcoin outperformed the US dollar amid geopolitical uncertainty.

Cryptocurrency markets staged their largest short squeeze since the selloff in early October, as a rebound in prices forced bearish traders to unwind positions and fueled hopes of a broader recovery.

Short liquidations across crypto futures and perpetual contracts climbed to about $200 million on Wednesday, the highest level since about $1 billion in short positions was wiped out during the October market crash, according to data shared by analytics firm Glassnode. The company said that it was the biggest short liquidation event across the 500 largest cryptocurrencies since the Oct. 10 selloff.

The rebound follows a significant recovery in investor sentiment, which has flipped from fear to greed for the first time since early October, Cointelegraph reported earlier on Thursday.

Some analysts said the short squeeze and sentiment improvement is a signal for better market conditions preceding a wider recovery. A short squeeze occurs when the price of an asset makes a sharp increase, forcing short sellers to buy the asset to avoid greater losses.

Related: Bitcoin ETFs on rollercoaster as traditional funds pull in $46B in 2026

Other analysts pointed to early signs of a market recovery as Bitcoin has begun to outperform the US dollar amid heightened uncertainty about the Federal Reserve’s independence and growing geopolitical concerns after the US capture of Venezuelan President Nicolás Maduro on Jan. 3.

”One structural tailwind for Bitcoin as a reserve asset is the rise in geopolitical volatility, which has so far been a headwind for the US dollar,” Nicolai Sondergaard, research analyst at crypto intelligence platform Nansen, told Cointelegraph.

”While precious metals remain the primary beneficiaries in this environment, Bitcoin is increasingly part of the conversation as an alternative reserve asset and could benefit from this trend, even if to a lesser extent,” he added.

Related: 2025 crypto bear market was ‘repricing’ year for institutional capital: Analyst

Source: CoinTelegraph