A record inflow day for spot Bitcoin and Ethereum ETFs collided with a large short squeeze this week, pushing both cryptocurrencies to levels last seen in January.
Bitcoin rose roughly 6% this week, briefly topping $87,300 intraday before settling in the mid-$85,000s, while Ethereum climbed roughly 5% into the mid-$2,700s, both cryptocurrencies reaching their highest levels since January. The move coincided with the strongest single-day haul for U.S. spot Bitcoin ETFs since October of last year: the funds took in roughly $999 million in a single session, led by BlackRock's IBIT with $381 million, while U.S. spot Ethereum ETFs pulled in about $270 million, their largest single-day inflow since early October of last year, with BlackRock's ETHA accounting for $110 million of that total.
The rally was amplified by a sharp short squeeze. Roughly $770 million in leveraged short positions were liquidated over 24 hours, forcing traders who had bet against the rally to buy back into the market at rising prices and adding fuel to the move. A widely tracked measure of crypto market sentiment, the Crypto Fear and Greed Index, reportedly reached 78, a reading of "extreme greed" not seen since the middle of last year.
The rally arrives against a broader risk-on backdrop: equity markets have pushed to fresh highs on AI-driven enthusiasm this week, while a pullback in oil prices has eased inflation expectations and pulled Treasury yields lower, conditions that have historically supported demand for higher-risk assets including cryptocurrencies. Whether this week's combination of record ETF demand and a forced short squeeze marks the start of a more durable move, or simply a sharp, mechanically-driven bounce after a soft September, is likely to become clearer as the current week of inflow data is confirmed and reported in full.