Crypto sentiment hits extreme greed as Bitcoin rallies toward $80,000

The sentiment index, which measures factors including price momentum, volatility, and derivatives activity, climbed from 41 to 81 as Bitcoin broke out of its mid-August trading range. Much of this rapid ascent was fueled by a massive short squeeze, as traders holding leveraged bearish positions were forced to buy back Bitcoin to cover their losses. According to CoinGlass, roughly $2.7 billion in short positions were liquidated during the 24-hour breakout, with Bitcoin shorts accounting for over $1 billion of that total.

Institutional demand through U.S.-listed spot ETFs provided further momentum, with funds attracting approximately $1.9 billion in the five days ending Aug. 21. While macro factors, including U.S. Treasury liquidity-support buybacks, have been linked to improved market conditions, analysts remain cautious. Nicolai Søndergaard of Nansen noted that while the price action reflects a structural improvement, it does not yet confirm a definitive turn in the market cycle. Market participants are now watching to see if spot demand can sustain these levels once the immediate impact of short-covering fades, particularly as elevated sentiment readings often signal that the market may be overheated and vulnerable to a correction.