Bitcoin [BTC] launched at the end of January with increased leverage as Open Interest (OI) hovered around $31-$32 billion while the price traded around $90,000. Gradually, derivatives exposure began to decline as risk sentiment weakened, pushing OI to $28 billion while the price fell.
Shortly afterwards, geopolitical headlines surrounding Iran escalated the uncertainty, and Bitcoin quickly fell towards the $63,000 zone. During this decline OI fell from roughly $29 billion to almost $21 billion, signaling a broad debt wave.
Source: CryptoQuant
At the same time the Coinbase Premium Index stayed deeply negative and fell to almost -0.25 as demand on the US spot market weakened. However, selling pressure slowly stabilized as the price consolidated between $65,000 and $68,000.
Source: CryptoQuant
Meanwhile, derivatives positioning remained compressed around $21-$22 billion, indicating that speculative exposure on the exchanges has declined. As March approached, conditions began to change as the Coinbase Premium Index returned to neutral levels.
Shortly afterwards, Bitcoin rebounded sharply above $73,000, while OI rose towards $24.7 billion. This combination suggests that short-covering has entered the market, translating the geopolitical shock into liquidity for the recovery.
Altcoins are rising as liquidity shifts beyond Bitcoin
After the earlier recovery phase, the market’s attention gradually shifted to higher beta assets. As volatility subsided, traders began reallocating capital to altcoins that tend to respond more quickly once stability returns.
Within this rotationseveral major altcoins quickly outperformed. Solana [SOL] rose about +9% in a day, indicating a renewed speculative appetite.
At the same time Chainlink [LINK] advanced by around +7%, reinforcing the shift towards liquid large-cap alternatives. Meanwhile, hyperfluid [HYPE] recorded almost +12% over the seven days, showing continued accumulation rather than a short-lived rebound.
Source: Santiment
However, broader sentiment still reflected lingering geopolitical fears. Many retail participants had already exited their positions during the previous panic selling caused by macro news. This behavior reduced immediate sell-side liquidity in several altcoin markets.
As a result, even moderate inflows began to push prices higher. Traders increasingly focused on assets with stronger short-term upside potential.
All in all, extreme fear forced weak hands at first to leave. Once stability returned, that same liquidity was converted into altcoins, allowing Solana, Chainlink, and Hyperliquid to outperform during the recovery phase.
Short squeeze in derivatives boosts Bitcoin’s rally
Bitcoin’s latest rally gained momentum when the derivatives markets staged a sharp short squeeze. At the time of writing: total crypto liquidations reached approximately $587.97 million in 24 hours.
Within this wave, Bitcoin responsible for almost $310 million, underscoring its dominant role in the move.
Source: CoinGlass
More importantly, short positions were the cause of most liquidations. About $272.75 million came from shorts, while longs accounted for just $36.21 million.
As prices rose, bearish traders rushed to cover positions.
Source: CoinGlass
These forced purchases gradually strengthened the upward pressure. As liquidations accelerated, momentum traders entered the market looking for short-term upside potential.
At the same time, increasing volatility intensified speculative activity on derivatives exchanges. This sequence turned short covering into a normal rebound into a stronger rally.
Short liquidations therefore acted as the main fuel behind Bitcoin’s upward acceleration, turning bearish positioning into forced demand and amplifying the rally’s momentum.
Final summary
- Bitcoin took advantage of a flush of nearly $63,000 in reset derivative positioning as Open Interest fell from $29 billion to $21 billion, allowing liquidity to recover and supporting the recovery to $73,000.
- Altcoins gained momentum as liquidity expanded beyond Bitcoin, with higher beta crypto assets outperforming once market fears subsided and capital returned to risk markets.