A $3.1 billion short liquidation cascade is punishing bearish Bitcoin traders as the cryptocurrency bounces off support levels following intervention by the US Treasury. The two-day wipeout, which peaked on Thursday with the largest single-day short liquidation on record, underscores the fragility of leveraged positions in crypto markets during periods of technical strength.
According to reporting by CoinTelegraph, Bitcoin accounted for $1.65 billion of the total short-position losses recorded between August 19-20. The asset’s recovery reflects a sharp reversal from earlier weakness, with BTC rallying to $71,992 on spot exchanges as of the latest data.
Treasury Intervention Triggers Unwinding
The liquidation event follows coordinated action by the US Treasury to address liquidity strains in traditional finance. Bitcoin’s response was swift and decisive—the asset spiked to its highest levels since early June on Wednesday, then extended gains throughout Thursday as short sellers capitalized on the momentum shift.
The speed of the move left leveraged traders exposed. Those holding bearish positions faced a classic short-squeeze dynamic: as prices rose, automated liquidation cascades forced exchanges to close underwater bets at market prices, creating additional upward pressure. This feedback loop amplified the two-day washout.
Record Profit-Taking Among Short-Term Holders
While shorts suffered, a different cohort of Bitcoin holders moved decisively to lock in gains. Short-term holders—wallets holding Bitcoin for fewer than 155 days—transferred a record 43,300 BTC to exchanges on Thursday, marking their largest profit-taking move of 2026, according to onchain data from CryptoQuant.
This behavior signals that many previously underwater positions have returned to profitability. The spent output profit ratio (SOPR) metric for short-term holders climbed to 1.01, its highest level since April. A SOPR above 1.0 indicates that coins are moving at prices higher than their entry points.
The technical picture matters here. Short-term holders had an aggregate cost basis of $68,700 per Bitcoin. With the asset now trading near $72,000, that cohort is only marginally profitable—a thin buffer that explains the aggressive profit-taking. Any sustained weakness could see renewed selling pressure from this group.
Scale Within Historical Context
The $3.1 billion short liquidation, while significant on a daily basis, remains modest relative to prior extremes in the crypto market. In August 2025, following Bitcoin’s reversal from an all-time high of $126,200, a $20 billion long liquidation event dwarfed the current episode. That cascade wiped out traders positioned for further upside.
Still, Thursday’s liquidation ranks among the top ten single-day events on record, per CoinMarketCap data tallying combined long and short wipeouts. The milestone reflects the sheer volume of capital now flowing through leveraged trading venues, even as macro volatility remains elevated.
The immediate question for traders is whether Treasury support will hold. If liquidity conditions stabilize in traditional markets, Bitcoin could consolidate above current levels. If renewed stress emerges, the thin profit margins among short-term holders suggest they may become forced sellers again—potentially triggering a fresh cycle of downside pressure.