Bitcoin's "Short Squeeze Rebound"—A Safe-Haven Asset or a Risk Appetite Indicator?

On April 6, Bitcoin broke through the $70k mark for the first time since March 25, reaching a high of $70,300, with mainstream cryptocurrencies like Ethereum and Solana also strengthening. This rebound was mainly driven by short covering—over $145 million in short positions were forcibly liquidated in the past 24 hours.

The three main logics behind the short squeeze:

First, the market was previously overly pessimistic, with an imbalanced position structure. Before the weekend, market sentiment was clearly bearish, with significant short positions accumulated. News of a ceasefire triggered a large-scale liquidation. The low liquidity environment during the European and Asian Monday holidays further amplified the "short squeeze" rally.

Second, the crypto market is attempting to decouple from traditional risk assets. Traditional markets responded to geopolitical uncertainties with safe-haven moves, with the S&P 500 down 1.2% and the US dollar up 0.3%. In contrast, Bitcoin and Ethereum remained resilient, highlighting the potential for crypto markets to be driven by internal catalysts—such as Morgan Stanley's newly approved low-cost Bitcoin ETF.

Third, signs of improved institutional capital flows. The physically-backed Bitcoin ETF listed in the US saw approximately $22.3 million in net inflows last week, a significant rebound from nearly $300 million in net outflows the previous week.

However, the sustainability of the rebound is questionable: blockchain data firm Glassnode pointed out that whenever Bitcoin approaches the $70k to $80k range, market liquidity tends to thin out, and there is noticeable profit-taking pressure. The largest open interest is concentrated in $60k put options, indicating that investors are still hedging potential downside risks with puts. Since the Iran conflict erupted in late February, Bitcoin has fluctuated roughly between $60k and $75k, and the current rebound has not yet broken through this range.
$BTC

Implications for investors: Bitcoin is undergoing a transition from a "pure risk asset" to an "alternative asset with safe-haven properties." The key to judging its future trend lies in three variables: the actual actions on April 7th regarding Trump's deadline, changes in the Strait of Hormuz transit situation, and further signals from the Federal Reserve's monetary policy. In the short term, caution is advised against chasing highs; in the medium to long term, investors can focus on opportunities around the lower end of the range.