Bitcoin pulled back from an eight-month high after a four-day rally

During Asian trading on September 22, Bitcoin fell in price after surging more than 13% over four days and reaching an eight-month high. Analysts cited by CoinDesk warn of the risk of a significant correction following the end of the rally and the sharp fluctuations typical of the early stages of a bull market.

During the U.S. trading session yesterday, Bitcoin prices rose to $87,381, but retreated to $85,500 early this morning in Singapore, according to Bloomberg. Bitcoin has returned to late-January levels and, even after the decline, is trading $10,000 above last week’s lows. Cryptocurrencies rose in value alongside other risky assets, including stocks. The markets owe their gains in part to falling oil prices and optimism ahead of the meeting between U.S. President Donald Trump and Chinese President Xi Jinping, the agency notes.

At the end of last week, money began flowing back into U.S. Bitcoin exchange-traded funds (ETFs). According to data from Farside Investors cited by CoinDesk, following a combined outflow of $746 million on Tuesday and Wednesday of last week, the funds attracted $160 million on Thursday and $433 million on Friday. Strategy, the largest institutional holder of Bitcoin, resumed buying for the first time in three weeks, which also bolstered market sentiment, Bloomberg notes.

When Bitcoin rose above $82,000, exchanges began forcibly closing short positions—traders’ bets on a price drop—CoinDesk explains. Closing these trades required offsetting transactions—purchases of contracts—which further pushed prices higher. According to Coinglass data cited by Bloomberg, over the past 24 hours, more than $1 billion worth of positions were forcibly closed across the entire crypto market. About $840 million of that amount came from bets on falling prices.

“It seems the issue is primarily one of market mechanics, rather than the confidence of market participants,” Bloomberg quotes BTC Markets analyst Rachel Lucas as saying. “Bitcoin rose above the upper boundary of the price range in which it traded in September and reached levels at which many short positions are forced to close—the rest was driven by forced buying [as short positions were closed].”

Nikolay Sendergor of the analytics firm Nansen is waiting for confirmation of demand from Bitcoin buyers themselves. “I want to see a steady inflow of funds into the spot market and into ETFs,” CoinDesk quotes him as saying. However, if demand for Bitcoin itself fails to keep pace with the growth in leveraged trading volume, the rally could quickly turn into a decline if government bond yields rise or a new geopolitical shock occurs, the publication warns.

Senderhor and Wintermute trader Jasper de Mare anticipate Bitcoin rising to $90,000. Hyperion Decimus portfolio manager Chris Sullivan believes the current rally marks the beginning of a new “bull” cycle, but warns: “When this rally runs its course, we’ll see a major correction” (as quoted by CoinDesk).

Rich Rosenblum, co-founder of the cryptocurrency market maker GSR, suggests that Bitcoin’s rise is being driven by a general influx of money into risky assets. “If that’s the case, a deterioration in the risk asset markets will put serious pressure on Bitcoin,” he said (as quoted by Bloomberg).

In the coming days, investors will be watching three things: ETF inflows, Friday’s options expiration, and signs of overheating in perpetual futures, de Mare noted. According to him, excessive open interest or elevated financing rates could indicate such overheating.

This article was AI-translated and verified by a human editor