Bitcoin Rally: Will the BTC Rally Continue or Is It a Bull Trap?

Bitcoin rally has once again drawn attention after BTC broke above the US$72,000 level and moved back above the 200-day moving average for the first time since November 2025. 

The move came after the U.S. Treasury expanded its long-term bond buyback program, boosting risk sentiment across the market. 

However, a rapid rise does not automatically mean a new bullish trend has begun. The surge was also driven by a large-scale short liquidation, raising the key question for the market: will Bitcoin continue higher, or is this rally simply a bull trap?

Key Takeaways

• Bitcoin has moved back above the 200-day MA, an important indicator for assessing the long-term trend direction.
• Bullish sentiment is supported by ETF inflows and a short squeeze, but part of the gains came from leveraged positions being forcibly closed.
• Confirmation of a bullish Bitcoin trend requires BTC to hold the breakout area, rather than merely touching higher levels for a few sessions.

Why Is Bitcoin Rallying?

The main catalyst behind the latest rally came from the policies of the U.S. Treasury. The U.S. Treasury Department announced that starting in September, the maximum size of long-duration Treasury buyback operations will be increased by at least twofold, from US$2 billion to US$4 billion per operation. 

The program is intended to improve liquidity in the long-term Treasury market.

The market response was swift. Bitcoin rose more than 13% since Wednesday and reached around US$72,500 on August 20. During the same period, the crypto market recorded approximately US$3.1 billion in short liquidations over two days. 

The mechanism is straightforward: when prices rise rapidly, traders holding short positions begin to incur losses. 

Positions that reach their margin limits are then liquidated, forcing the system to buy BTC to close them. These forced purchases can push prices even higher.

Read Also: Bitcoin Price Could Move 30%, Is BTC Heading to US$83,200 or $44,800?

Technical Signals Are Starting to Change

One of the most important developments in Bitcoin's price movement is BTC's return above the 200-day MA.

This indicator is often used to assess the long-term trend. When prices are above the 200-day MA, technical sentiment is generally more constructive; conversely, trading below it can indicate bearish pressure.

According to data cited in the latest analysis, the 200-day MA stands at around US$69,005, while the 50-day MA is around US$63,976. BTC has once again moved above the 200-day MA after spending months below it. 

However, the breakout is not automatically valid. What matters is whether BTC can hold the level and establish consistent daily closes above the area.

If the price falls back below the 200-day MA after a brief breakout, the signal could turn into a fake breakout or bull trap.

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Is Bitcoin Bullish or Just a Short Squeeze?

Recent data provides reasons for both optimism and caution.

On the positive side, U.S. spot Bitcoin ETFs recorded approximately US$517 million in net inflows on August 19, making it one of the largest inflows in several months. This is important because ETF demand provides a more tangible source of spot buying compared with gains driven solely by derivatives. 

However, the short squeeze also played a major role. When billions of dollars in short positions are liquidated, prices can rise much faster than under normal spot demand conditions.

This means Bitcoin's price can appear very strong today without necessarily indicating that long-term investors have fully returned.

Some believe positive demand is beginning to return to the spot and derivatives markets, but the scale remains modest. In their view, the conditions could become more convincing as the start of a bullish cycle if they persist for around a month. 

Read Also: Bitcoin Is in a "Deep Freeze," What Does It Mean According to Michael Saylor?

Levels Investors Should Watch

After breaking above the US$70,000 area, BTC needs to hold this region to prevent momentum from fading quickly.

Technically, the 200-day MA around US$69,005 is now an important area. If BTC can hold above it, the level could potentially shift from resistance to support.

Conversely, a decline back below the 200-day MA would be a warning signal. The faster the price returns below the indicator, the greater the possibility that the previous breakout was only a temporary move.

Traders should also avoid excessive leverage. After a major short squeeze, volatility typically increases, and sharp corrective moves can occur even when the primary trend remains bullish.

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What Could Turn the Rally Into a Bull Trap?

A bull trap usually occurs when the price breaks through resistance, attracts new buyers, and then reverses lower and breaks the breakout level.

Under current Bitcoin conditions, several factors could trigger such a scenario. One is a rebound in U.S. bond yields after they previously declined following the Treasury announcement. On August 20, the 30-year Treasury yield rose again after briefly falling sharply. 

In addition, profit-taking activity has increased. On-chain data cited by CoinMarketCap shows that short-term holders moved approximately 43,300 BTC to exchanges on August 20, marking the group's largest profit-taking activity throughout 2026. 

If selling pressure increases while buying momentum weakens, BTC could quickly lose the breakout area.

Read Also: Latest Bitcoin Prediction: Japanese Yen Could Push BTC Price Higher

Will Bitcoin Move Higher?

To determine whether Bitcoin will rise, the market needs to assess whether three key components remain supportive: spot demand, liquidity conditions, and technical structure.

If ETF inflows remain positive, BTC holds above the 200-day MA, and global liquidity supports risk assets, the prospects for the rally to continue become stronger.

Conversely, if ETFs return to outflows, yields rise, and BTC fails to hold the US$69,000 area, the rally could enter a correction phase.

Therefore, the current condition is better described as bullish confirmation in progress, rather than a new bull market that has already been confirmed.

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Conclusion

The latest Bitcoin rally has a stronger foundation than a purely speculative move because BTC broke above the 200-day MA and ETFs recorded significant inflows. However, a short squeeze worth billions of dollars was also an important component of the rise. 

To confirm a bullish Bitcoin trend, BTC needs to hold the breakout and establish new support above the 200-day MA. If it fails to do so, the rally could turn into a bull trap.

Therefore, the question of whether Bitcoin will rise or fall does not yet have a definitive answer. What matters more now is whether the emerging momentum can persist after the effects of short liquidations begin to fade.

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FAQ

What is causing the latest Bitcoin rally?

The rally was driven by a combination of the U.S. Treasury's increased buyback program, improving risk sentiment, Bitcoin ETF inflows, and a major short squeeze in the derivatives market. 

What does Bitcoin breaking above the 200-day MA mean?

It is a positive technical signal because the 200-day MA is widely used as a long-term trend indicator. However, the breakout needs to hold to avoid turning into a fake breakout.

Is Bitcoin currently bullish?

The signals are becoming bullish, but they cannot yet be considered fully confirmed. BTC needs to hold the breakout level and demonstrate consistent spot demand.

What is a Bitcoin bull trap?

A bull trap occurs when BTC breaks through resistance and appears bullish, but then reverses lower, leaving buyers who entered during the breakout trapped in losing positions.

What levels are important for Bitcoin right now?

The 200-day MA at around US$69,005 is one of the key levels. Holding above it strengthens the bullish scenario, while falling back below it could weaken the rally structure.