Bitcoin's Short-Squeeze Dynamics and Path to $100,000

Bitcoin's 2025 price action has been a rollercoaster of extremes, oscillating between record highs and brutal corrections. Amid this volatility, short-covering rallies and structural demand validation have emerged as critical forces shaping the market. This analysis unpacks how these dynamics could propel Bitcoin toward $100,000 in 2026, despite persistent structural headwinds.

Short-Covering Rallies: Catalysts and Constraints

Short-covering rallies-where traders reverse bearish positions to avoid losses-have defined Bitcoin's 2025 trajectory. The most dramatic example occurred on October 10, 2025, when new U.S. tariff measures and software export controls triggered a $19 billion liquidation event, the largest in crypto history. This crash created a buying opportunity for short-coverers, briefly pushing Bitcoin back toward $86,000. However, structural factors like overhead supply walls and concentrated options expiries have repeatedly capped further gains.

A hidden supply wall between $81,000 and $93,000 has mechanically pinned Bitcoin's price, with sharp corrections like the December 17, 2025, $3,000-per-hour surge followed by a collapse to $86,000 underscoring this ceiling. These dynamics suggest that while short-covering rallies can generate temporary momentum, they are insufficient to break through entrenched resistance without broader structural support.

. This visual captures the volatile but patterned nature of Bitcoin’s short-covering rallies and structural resistance in the market.

Structural Demand Validation: ETFs and Institutional Buying

The maturation of Bitcoin's market infrastructure has introduced a new layer of demand validation. U.S. spot Bitcoin ETFs, now a $103 billion asset class, have evolved from volatility amplifiers to stabilizing forces. For instance, BlackRock's IBIT, with $50 billion in assets under management, dominates the ETF market, absorbing sell orders during pullbacks and acting as a buffer against panic-driven selloffs.

Institutional buying has further reinforced this trend. Entities like MicroStrategy, which holds 708,000 BTC at a low average cost, have continued accumulating Bitcoin at rates exceeding daily mining output, directly pressuring OTC liquidity. Meanwhile, regulatory clarity-bolstered by the GENIUS Act's passage-has normalized Bitcoin as a strategic allocation, with 86% of institutional investors now exposed to digital assets.

However, structural challenges persist. Long-term holders are selling covered calls, generating premiums while exerting downward pressure on spot prices. This creates a net negative delta, dampening rallies and keeping Bitcoin range-bound. Despite these headwinds, ETF inflows have remained resilient, with net inflows rebounding to $290 million in one week during a price correction.

The Path to $100,000: A Structural Break or Institutional Rebalancing?

Bitcoin's path to $100,000 hinges on two scenarios: a structural break in overhead supply or a sustained institutional rebalancing phase. Copper's research posits that institutional ETF cost basis levels could drive Bitcoin to $140,000 within 180 days, leveraging rebalancing cycles to overcome short-term volatility. This aligns with historical patterns where institutional allocations to Bitcoin are frequently adjusted, creating temporary corrections followed by strong rallies.

Yet, the road is fraught with risks. A sustained drop below $80,000 could trigger deeper sell-offs, exacerbated by weak on-chain activity and declining blockchain revenues. Conversely, if ETF inflows and institutional buying accelerate, Bitcoin could test the $93,000 supply wall-a critical inflection point.

Conclusion: Balancing Fear and Fundamentals

Bitcoin's 2025 narrative is one of extremes: a market caught between institutional optimism and retail fear. While the Crypto Fear and Greed Index remains in "extreme fear" territory, structural demand from ETFs and institutional buyers provides a floor. The key question is whether this demand can evolve from a stabilizing force to a breakout catalyst.

For now, Bitcoin's price action suggests a controlled downtrend rather than a panic-driven collapse. If institutional rebalancing and ETF inflows gain momentum, the stage may be set for a short-covering rally that pierces the $93,000 ceiling-and ultimately, a path to $100,000.