Bitcoin: A Record $2.7 Billion Short Squeeze Wiped Out the People Betting on a Crash

On Wednesday 19 August 2026 two announcements landed in Washington within hours of each other. The US Treasury, under Secretary Scott Bessent, said it would at least double its buybacks of long-dated government bonds, to $4 billion per operation, after the 30-year yield hit 5.34%, its highest since 2007. Then, at a White House meeting with crypto and finance executives, President Donald Trump urged Congress to pass the CLARITY Act, a bill to set rules for crypto markets, said the US was considering buying "sizable" amounts of Bitcoin, and added that Mike Selig, chairman of the Commodity Futures Trading Commission (CFTC), was working to bring the crypto exchange Hyperliquid into the United States "in a fully compliant and legal fashion".

Within a day Bitcoin had jumped from about $64,100 to above $71,000, a price it had not seen since early June. Most of that move happened in about an hour, and almost none of it was voluntary buying. It was the people who had bet on a fall being forced to buy.

Bets on a fall, forced closed

According to the data firm CoinGlass, about $3 billion of leveraged crypto bets were wiped out in 24 hours across 172,108 trader accounts, as reported by CoinDesk. Roughly $2.7 billion of that, about 92%, came from shorts, bets that prices would fall. Bets on a rise lost only $257 million. Bitcoin accounted for $1.42 billion of the losses, Ether, the coin of the Ethereum network, for $1.13 billion and Solana for $104.67 million. The single largest casualty was a $48.8 million Bitcoin short on Hyperliquid.

CoinDesk called it the largest wave of forced short closures in records going back to 2021. It was bigger even than the short side of 10 October 2025, the worst day in crypto history, when $19 billion of bets were wiped out but only about $2.47 billion of them were shorts. Other counts differ by time window: Cointelegraph tallied $3.1 billion of shorts across 19 and 20 August. All of them may understate the total, because Binance, the largest exchange, has limited what it reports about forced closures since 2021.

How a short squeeze works

A short seller borrows something, sells it, and hopes to buy it back cheaper later. In crypto most shorts are placed with leverage, borrowed money: a trader puts down $1,000 as a deposit and bets as if they had $10,000 or more. If the price rises far enough to eat the deposit, the exchange closes the bet automatically by buying the coin back at whatever price it can get. That is a liquidation, a margin call with no phone call and no chance to top up.

The trap is that the forced buying pushes the price up, which closes the next layer of shorts, which pushes the price up again. On 20 August more than $1 billion of Bitcoin shorts were closed in roughly an hour and Bitcoin rose more than 8% inside that hour, according to CoinDesk. Nobody in that chain decided Bitcoin was worth more. The machines bought because the rules said so.

The fuel had been building for six weeks. Bitcoin had been stuck between about $62,000 and $66,900 since 8 July, and traders had leaned against a breakout. The long-short accounts ratio, a count of how many trading accounts on the big exchanges were betting up for every one betting down, had fallen to 0.835 from about 1.05 earlier in the week: roughly 84 accounts long for every 100 short. Open interest, the total value of outstanding futures bets, rose 9% to $131 billion that day, according to the data firm Coinalyze.

Hyperliquid itself is a sign of how this market works. It is a decentralised exchange, run by code on its own blockchain rather than by a company holding customer money, and it offers "perpetual futures", bets on a coin's price that never expire. It blocks US users, yet it has become one of the busiest venues in the world for these bets. Commentators noted afterwards that his remark was not a regulatory approval and that no US application had surfaced. Its own token, HYPE, rose more than 20% in a day.

Who was buying for real

Some of the demand was genuine. US spot Bitcoin ETFs, funds that hold actual Bitcoin and trade like shares on the stock market, took in $517 million on 20 August, their biggest day since early May, according to SoSoValue data reported by The Block. BlackRock's IBIT took $284.7 million of it. Ether funds added $189 million, CoinDesk reported. Analysts quoted by The Block linked the inflows to the Treasury's buyback news rather than to Trump's crypto remarks. Spot Bitcoin ETFs went on to take in about $3.52 billion over August, their best month since September 2025.

Still, the squeeze was concentrated and fast, and those are warnings rather than reassurances. A price lifted by short covering has no buyer underneath once the shorts are gone.

Two weeks later, the other side lost

On Friday 4 September Bitcoin peaked at $82,281, then reversed sharply after US jobs figures for August came in far stronger than expected, which traders read as bad news for interest rate cuts. It fell below $78,700 before steadying near $79,500. This time the people on the other side paid: long liquidations across the market topped $295 million against $213 million of shorts, according to Bitcoin.com News.

The policy promises behind 19 August mostly stalled. On 15 September the CLARITY Act failed a 49 to 50 procedural vote in the Senate. Hyperliquid still blocks US users. In the first days of October Bitcoin slid from about $87,000 to near $80,000 and more than $2 billion of mostly bullish bets were liquidated over the week, according to Crypto Briefing. In mid-October 2026 Bitcoin trades around $82,000 to $83,000.

Two cascades in a fortnight, in opposite directions, destroyed two different groups of traders through the same mechanism. On 20 August the bears lost. On 4 September and again in October it was the bulls. Leverage does not care which way a trader is pointed.