Charles Schwab says Bitcoin short squeeze is over as leverage resets and Fed stays hawkish

Bitcoin’s explosive August rebound was built on borrowed conviction, and Charles Schwab says the bill has come due. In its August 21 Weekly Trader’s Stock Market Outlook, Schwab confirmed that the short squeeze driving Bitcoin’s recent surge has run its course, citing a full leverage reset and a Federal Reserve that shows no sign of loosening up.

A record liquidation event

On August 19 alone, a record $1.37 billion in Bitcoin short positions were liquidated, nearly doubling the prior single-day record. Over August 19 and 20 combined, more than $2 billion in leveraged short bets were wiped out. Bitcoin, which had been trading around $65,000 heading into that stretch, rocketed to nearly $80,000 by the time the dust settled. That works out to roughly a 23% gain in a single week.

To put the starting point in context, Bitcoin had already fallen somewhere between 45% and 53% from its all-time high near $126,000, reached in October 2025. The short interest that built up during that decline was, by any measure, substantial. When it unwound, it unwound loudly.

Schwab’s report framed the move clearly: short squeezes like this are typically transient. The price action was real, the pain for short sellers was real, but the underlying catalyst was mechanical rather than fundamental. Buying pressure from forced liquidations is not the same as buying pressure from investors who genuinely changed their minds about the asset.

The market structure after the squeeze

One of the cleaner signals that the squeeze has run its course is the state of perpetual futures open interest. After the liquidation cascade, open interest dropped to its lowest level since May 2026. Funding rates returned to a neutral state following the squeeze.

Schwab flagged this dynamic directly, noting that 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. The firm has also 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, Schwab’s caution about post-squeeze dynamics is the more relevant signal. The firm is simultaneously building long-term infrastructure for crypto adoption while warning its traders not to chase a move that was driven by mechanics rather than fundamentals.

The open interest reset and neutral funding rates give the market a cleaner slate than it had two weeks ago.

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