Bitcoin Bulls Trigger $145M Short Squeeze as CLARITY Act Momentum Revives Risk Appetite

Bitcoin Reclaims Ground After Volatile Session

On May 14, bitcoin reversed course, wiping out losses incurred 48 hours earlier after jumping by approximately $2,000 during a frenzied four-hour window. Market data showed the cryptocurrency spent much of the late May 13 session and Thursday morning struggling to breach the $80,000 mark. However, shortly after 8 a.m. EDT, bitcoin experienced a steep ascent, peaking just above $82,000.

At the time of writing (1 p.m. EDT), bitcoin was trading around $81,500 and appeared poised to test the $82,000 level again. The surge drove 24-hour gains of 3.5% and its market capitalisation to $1.63 trillion, helping lift the broader crypto economy’s market cap to close to $2.8 trillion.

The sudden rally resulted in $70.5 million in short bets being liquidated in 24 hours, compared to $14 million in long bets. Overall, the cryptocurrency market saw $236 million in leveraged positions wiped out, with shorts accounting for $145 million.

Bitcoin’s rebound, mirrored on Wall Street, came hours after it was weighed down by the latest U.S. inflation figures. Though largely expected, the magnitude of the increase—particularly in the producer price index (PPI)—suggested the Middle East conflict and the closure of the Strait of Hormuz are having a larger impact on the U.S. economy than anticipated.

However, headlines regarding President Donald Trump’s much-anticipated visit to China quickly reshaped the narrative. Many investors hope the summit will help both countries resolve outstanding issues and scale back costly tariff wars. Some observers are optimistic that a positive outcome will persuade China to convince Iran to reopen the Strait of Hormuz.

While a resolution in the Middle East is in the interest of both nations, experts warned that the volume of oil lost due to the strait’s closure means markets likely won’t fully recover until 2027, even if an agreement were reached today. This suggests oil prices will remain elevated, a prospect U.S. senators warned would devastate American businesses and families.

For bitcoin, the optimism surrounding the summit and the U.S. Senate Banking Committee’s advancement of the CLARITY Act helped it resume a rally that has seen it climb from just over $66,000 at the start of April to $82,000 by mid-May. On the prediction platform Polymarket, odds that bitcoin will hit $85,000 in May stood at 56%, an increase of 5 percentage points.

Still, others warn that if U.S. inflation data and energy prices continue to trend higher, markets may begin repricing the Federal Reserve’s broader liquidity cycle, potentially leading to a simultaneous increase in crypto market volatility and liquidation risks.