Charles Schwab says the short squeeze that drove Bitcoin's August rebound has run its course, pointing to a full leverage reset and a Federal Reserve still holding a hawkish stance. The firm's August 21 outlook flags open interest at its lowest since May 2026 and funding rates back to neutral, signaling a digestion phase ahead.
Charles Schwab says the leverage that fueled Bitcoin's August rally has burned off, and traders should not expect the squeeze to repeat. In its August 21 Weekly Trader's Stock Market Outlook, Schwab confirmed the short squeeze behind the recent surge is over, citing a full leverage reset and a Fed that shows no sign of loosening policy.
A record liquidation event
On August 19, a record $1.37 billion in Bitcoin short positions were liquidated, nearly double the prior single-day record. Combined with August 20, more than $2 billion in leveraged short bets were wiped out. Bitcoin, trading around $65,000 heading into that stretch, rocketed to nearly $80,000 by the time the dust settled. That works out to a roughly 23% gain in a single week.
That rebound followed a steep drop: Bitcoin had already fallen somewhere between 45% and 53% from its all-time high near $126,000, reached in October 2025. Schwab's report framed the squeeze as mechanical rather than fundamental — forced liquidations, not investors changing their minds about the asset.
Market structure resets
One signal that the short squeeze has run its course is perpetual futures open interest, which dropped to its lowest level since May 2026 after the liquidation cascade. Funding rates returned to neutral following the squeeze. Schwab flagged this dynamic directly, noting a digestion phase would likely follow such a rapid price surge.
Schwab acknowledged the conversation around whether the lows near $65,000 represent the floor of this bear cycle, without endorsing a conclusion.
Schwab's expanding crypto footprint
Schwab recently launched spot Bitcoin and Ether trading for retail clients, and has outlined plans to expand its Schwab Crypto platform to include Solana, Avalanche, and Chainlink alongside its existing Bitcoin and Ether offerings. For the near term, though, Schwab's caution about post-squeeze dynamics is the more relevant signal: the firm is building long-term crypto infrastructure while warning traders not to chase a move driven by mechanics rather than fundamentals.
Source: Crypto Briefing
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