According to Woofun AI, the rebound in Bitcoin near $87,000 has seen a fundamental reversal in its underlying driving logic, quietly shifting from a short squeeze dominated by short covering to a fragile phase marked by rapidly accumulating long position risk. Although the price appears strong on the surface, internal structural imbalances are undermining the sustainability of the rally, signaling that this bull run's momentum may be nearing a staged exhaustion.
On the demand side, buying forces across multiple dimensions are showing comprehensive and significant signs of contraction, contrasting sharply with the price's eight-month high of $87,400. Analysis from CryptoQuant points out that this price level should have been viewed as the starting point of a new bullish phase, with its Bitcoin bullish index climbing to 90 out of 100, indicating an overall market environment that appears favorable. However, data from Look Into Bitcoin reveals that "Bitcoin market sentiment has reached its highest level of greed since July 2025," and such extreme sentiment often precedes a depletion of follow-through momentum.
The more critical variable lies in the cliff-like drop in actual capital inflows. Woofun AI-compiled data shows that over the past 30 days, real demand in the spot market decreased by approximately 170,000 Bitcoin, indicating that the cash market's absorption capacity can no longer match the pace of price appreciation. ETF fund flows in the U.S. market (IBIT.US) also confirm this trend, with data showing that over the past week, daily net inflows into ETFs fell by 97%, plummeting from about $1 billion to just $31 million on September 28. The cooling of speculative demand has been even more dramatic, with CryptoQuant estimating that demand growth in the futures market has shrunk from 164,000 Bitcoin on September 14 to approximately 16,000 Bitcoin, directly cutting off the source of additional leveraged demand that had been fueling Bitcoin's rise. The lack of new demand has left the market particularly passive in the face of profit-taking pressure.
Meanwhile, supply-side pressure is intensifying as holders realize larger profits, leading to severe imbalances in market structure. Short-term traders' unrealized profit margins have risen to 33%, the highest level since December 2024, meaning that once investors choose to reduce positions, a large amount of profit will be realized. In fact, this profit-taking behavior has already erupted in concentrated fashion recently, with 25,700 Bitcoin redeemed by holders on September 22, the highest single-day realization volume in 2026, as investors seized the opportunity of rising prices to lock in profits at recent highs.
Although overall leverage is declining, Bitcoin's market structure is increasingly reliant on derivatives, with the spot-to-futures trading volume ratio on Binance at approximately 0.12, meaning that roughly 90% of total trading activity occurs in the futures market. For every $1 traded in the spot market, about $8 to $9 is traded through derivatives. Over the past week, the value of open contracts on Binance has dropped from $10.6 billion to approximately $9.2 billion, while Glassnode data shows that open contract value denominated in Bitcoin still fell by nearly 20%, reaching its lowest level since March. While this reduction in leverage lowers the risk of large-scale liquidations, it also weakens the speculative momentum needed for a rapid rally.
Notably, Alphractal data indicates that as Bitcoin approached $87,000, it swept through the largest cluster of short positions accumulated over the past 365 days, triggering the largest wave of short liquidations of the year. However, with the exhaustion of forced buying pressure, open positions are now concentrated primarily on the long side. Alphractal CEO Joao Wedson pointed out that its "Whale vs. Retail Divergence Indicator" shows that whales' bullish sentiment, while having strengthened at times, did not persist. The indicator needs to turn positive to prove that large investors have a sustained willingness to drive the market. Currently, this shift in position structure has significantly increased downside risk.
Warning signals for downside risk now clearly point to key support levels, and once breached, potential long liquidations will become the primary threat. The 365-day moving average sits near approximately $80,000, which is also the price level CryptoQuant identified when determining the start of a new bullish phase. If the price falls back toward this level, it will be the first test of this breakout's resilience in the face of changes in demand and position structure. Further down, the 200-day moving average is around $71,000, while traders' actual transaction price is near $67,000. If Bitcoin loses the critical $80,000 support, the market will face increasingly deeper support tiers, and the long positions left over after the previous short squeeze may become the source of the next wave of forced liquidations, triggering a more severe price correction.