Trump Iran pledge sparks Bitcoin short squeeze

Donald Trump’s May 20 pledge to end the Iran war erased about $184.6 million in crypto short positions and pushed Bitcoin toward a potential short squeeze. At the time of the pledge, Bitcoin traded at $77,808 inside a falling channel that has held since May 6. Analysis shows roughly $9.35 billion in short liquidation risk stacked above the market while long-term holders added 29,782 BTC to their balances.

The initial liquidation cascade occurred within 24 hours of the statement and mostly affected short contracts, with Bitcoin-USDT short positions taking the largest share. Exchange data for the past seven days show cumulative short liquidation leverage on Binance’s BTC/USDT perpetual market of about $2.16 billion versus $1.28 billion for longs, leaving short exposure roughly 1.7 times larger and concentrated above the current price. An analysis by Alphractal CEO Joao Wedson mapped $9.35 billion in potential short liquidations above the market and $12.73 billion of potential long liquidations below.

The cascade mechanism operates through leveraged perpetual futures. Small upward price moves force some short positions to close, which pushes price higher and can trigger further short liquidations in a chain reaction. Traders closed short contracts as prices rose after the May 20 statement, producing the initial wipe of $184.6 million in shorts.

Technical indicators show sellers controlled a falling channel on the eight-hour chart from May 6 through mid-May. Buyers defended the channel’s lower trendline on May 18 and produced a 2.82% rebound, but the recent eight-hour candles climbed on weakening volume. The 100-period exponential moving average sits near $77,685, with the 20-EMA at $77,911 and the 50-EMA at $78,529 forming immediate resistance.

A clear push above the 50-EMA would open the path toward the channel’s upper trendline, which aligns with the 0.618 Fibonacci level at $80,889, about a 4% rise from the current price. A price move above $80,889 would expose a short cluster between roughly $83,109 and $84,131 and set a next target near the 1.0 Fibonacci level at $83,914. On the downside, Bitcoin needs to hold the 0.236 Fibonacci level at $77,864 and the channel low at $75,995; a breach of $75,995 would reactivate the bearish channel and expose the 200-period EMA near $76,327.

On-chain data show long-term holders adding supply while price has traded lower. Glassnode’s Hodler Net Position Change rose from 22,365 BTC on May 4 to 29,782 BTC on May 20, a 33.2% increase in just over two weeks. The increase reflects net monthly additions to balances by addresses classified as long-term holders.

Trump posted on social media: ‘We’re going to end that war very quickly. They want to make a deal so badly. They’re tired of this.’ The statement coincided with the initial short liquidations and higher bids in Bitcoin markets.

Analysts note that changes in oil prices, inflation and central bank policy would take days to weeks to flow through traditional markets. In contrast, leverage in perpetual futures can trigger rapid price moves when liquidation clusters sit close to the market. Market participants are watching the $80,889 level as a potential trigger zone for faster short-liquidation activity.