Bitcoin slipped back toward $79,000 on Wednesday after its sharp rebound stalled at resistance near $81,000, testing whether the recovery has enough genuine buying pressure to continue. The cryptocurrency hit an intraday high of $81,265 on Tuesday, its strongest level in three months, before reversing lower.
Despite the pullback, Bitcoin remains roughly 24% higher since August 17. However, the rejection came after a rapid advance that was partly driven by forced short covering, raising questions about the sustainability of the move.
Resistance zone proves tough
Tuesday's peak landed almost exactly on Bitcoin's 50-week moving average, which sits near $81,085. The May swing high around $82,800 adds another layer of overhead supply just above the market. After a 24% rally in just over a week, that zone offered traders an obvious place to lock in profits.
FOREX.com market analyst David Scutt warned on Wednesday that repeated failed breakouts are becoming harder to ignore. "At some point, repeated failures stop looking like bad luck," Scutt wrote. He pointed to overbought daily momentum, emerging bearish divergence in the relative-strength index, and a bearish crossover in the four-hour MACD.
That does not mean Bitcoin has suddenly lost the macro catalysts behind its rebound. Rather, the cryptocurrency reached an important technical area after momentum had become stretched and unrealized profits had risen sharply. For bulls, clearing the $81,000-$83,000 zone now matters more than another brief intraday move above $80,000.
Short-squeeze fuel fading
The bigger question concerns what powered Bitcoin into that resistance. Charles Schwab head of crypto research Jim Ferraioli told CoinDesk that about $6.4 billion of leveraged short perpetual positions had been liquidated during the rally. "Ultimately, short squeezes tend to be short-lived," Ferraioli said.
Those liquidations force bearish traders to buy Bitcoin to close positions, accelerating gains. However, once those positions are cleared, the same source of automatic demand largely disappears. Bitget Research chief analyst Ryan Lee told CoinDesk that "the durability of the rally now depends on whether institutional buying continues after forced liquidations have cleared."
Lee said Bitcoin could consolidate between roughly $74,000 and $81,000, while a retreat toward $75,000-$76,000 would still resemble ordinary profit-taking after such a rapid advance.
ETF inflows keep bull case alive
There is evidence that genuine capital is supporting the rebound. US spot Bitcoin ETFs attracted $337.56 million on August 24, extending their streak to six consecutive inflow sessions. According to SoSoValue data, the six-day run brought more than $2.5 billion into the products.
That distinction matters because ETF purchases can continue after leveraged shorts have been flushed out. CryptoQuant research head Julio Moreno remains constructive, saying "basically all metrics are pointing to the initial phase of a new bull market," with the firm's Bull Score jumping from 30 to 80 in one week.
But Moreno identified another hurdle: Bitcoin still needs to move above its 365-day moving average near $83,000 for stronger confirmation. CryptoQuant also sees reasons for near-term caution. Unrealized profits are elevated and exchange inflows have increased, potentially creating additional selling pressure as holders take gains.
For context, the broader crypto market has been buoyed by recent ETF inflows and improved liquidity, while Ethereum also saw a record short squeeze. Meanwhile, traditional markets have shown resilience, with the Dow climbing on AI chip optimism ahead of Nvidia's earnings.
This article is for informational purposes only and does not constitute financial advice.
