Yesterday’s rally in BTC, ETH, and SOL was absolutely not simply because of the U.S. SEC’s crypto regulatory proposal:

Last night, the U.S. SEC rolled out a new proposal for crypto regulation (Regulation Crypto Assets).

“You violated the rules, I will punish you”; and now it has shifted to, “I’m telling you the rules—follow them as the rules develop.”

The biggest factor is: extreme short positions + a market liquidity freeze point.

Liquidation profits far exceed the cost of a pump!

Favorable policy expectations + passive buying pressure from derivatives liquidations + a reversal in market sentiment

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Data shows that when BTC broke above around $69,000, within a short period there were short liquidations on the scale of over $1 billion. The shorts were forced to cover, becoming an important fuel for the rise.

Based on open-interest contracts and the liquidation heatmap, around 70,000 is an area where a large amount of leveraged positions are focused. After breaking through, it’s easy to trigger a chain liquidation.

The market has built up a large amount of short leveraged exposure

Previously, many funds believed that:

BTC’s rebound is just a short squeeze/false breakout; the gains in ETH and SOL are too large and likely need to pull back.

A large number of short positions are concentrated in key price zones.

When BTC breaks through a key resistance level:

Shorts’ stop-losses are hit, and exchanges force liquidations.

Shorts can only be forced to buy BTC to cover.

Formed by:

Price rises → blow-off shorts → buy → continue rising

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But here’s the problem:

Is this truly the start of a capital-driven bull market?

Is it just another typical leveraged liquidation move?

It mainly comes down to two indicators:

First

Has spot trading volume expanded at the same time?

If it’s only pushed by contract liquidations:

Price rises, but spot capital has not entered noticeably;

Then it’s more like a liquidity squeeze.

Second

After the rally, will the capital continue to absorb?

A real bull market:

It’s not driven by the death of shorts.

Rather:

Spot capital continues to buy

Institutions keep allocating

The market forms a new consensus to rise

So this time, I’m more inclined to view the rally as:

Policy expectations + the first-stage rebound caused by short liquidations!

Further observation is needed:

Is it really new capital entering?

Or is it just a major cleansing of the leveraged market?

The market is never short of opportunities.

What truly matters is:

Understand the source of the rally’s underlying capital

“If the rally comes from genuine spot demand, the trend will continue.

If the rally is mainly driven by short liquidations, after the liquidation cycle ends, the market will seek a new direction again.