Bitcoin retreated toward US$84,000 on Thursday after failing to sustain gains above US$85,500, even though earlier-than-expected lower US inflation data had sparked optimism regarding Federal Reserve (Fed) monetary policy.
At the time of writing, Bitcoin was trading at US$84,596, down 0.30% since the opening of the Asian session on Friday.
Selling pressure around the US$85,000 level continues to cap Bitcoin's gains, with supply from long-term holders and high US bond yields acting as key factors.
The market now requires stronger genuine buying demand to support a sustained price breakout.
Short Squeeze Effect Waning
Bitcoin's earlier rally was partly driven by a short squeeze—a scenario where traders betting on a price drop are forced to buy back Bitcoin to close their positions as prices rise.
According to CoinGlass data cited in the report, crypto position liquidations reached US$1.06 billion within a 24-hour period as Bitcoin broke past US$85,000, including US$844 million from short positions.
However, support stemming from the closing of short positions is diminishing.
Glassnode reported that Open Interest in Bitcoin units has fallen by nearly 20% compared to August levels, while Bitfinex analysis indicates that futures market positioning remains largely neutral.
This implies that Bitcoin needs new buyers injecting actual capital into the market to sustain upward momentum, rather than relying on forced buying from traders closing out short positions. Long-Term Holders Pose Resistance at $85,000
Glassnode has identified the $84,000 to $85,000 zone as an area with a high concentration of purchase costs for long-term holders.
This situation could increase selling pressure when Bitcoin returns to these levels, as some investors might choose to take profits or sell their holdings at break-even prices.
Consequently, new demand must absorb the supply from existing holders before Bitcoin can sustain a rally beyond $85,000.
Bitcoin ETF Inflows Remain Supportive
Despite the difficulty in driving prices higher, demand via US spot Bitcoin exchange-traded funds (ETFs) continues to show support.
According to the report, US spot Bitcoin ETFs recorded inflows for nine consecutive trading sessions leading up to Tuesday, totaling approximately $3.1 billion.
These inflows indicate that institutional capital is still entering the market. However, this demand may not be strong enough to overcome the selling pressure from long-term holders.
Attention is now focused on whether ETF inflows can be sustained and accompanied by increased Bitcoin buying in the spot market.
US Bond Yields Limit Bitcoin's Momentum
Rising US Treasury bond yields are also limiting Bitcoin's ability to continue its recovery.
The 10-year US bond yield has reportedly returned to around 5.28%, while the 30-year yield stands at approximately 5.62%—levels approaching highs not seen since 2002, according to the report.
High bond yields can make risk assets like Bitcoin less attractive to some investors, as government bonds offer interest returns without exposure to cryptocurrency price volatility. This situation caused the positive impact of lower US inflation data to be short-lived, making it difficult for Bitcoin to sustain gains above US$85,000.
Bitcoin continues to face pressure in maintaining gains beyond the US$85,000–US$85,500 range.
A breakout supported by spot market demand and sustained ETF inflows could pave the way for a further recovery.
However, as long as supply from long-term holders continues to absorb demand and US bond yields remain high, Bitcoin risks moving sideways or retesting lower levels.
Market focus is now shifting to the strength of actual buying activity to determine whether Bitcoin can break out of its current trading range.
