Almost $2 billion wiped out in 24 hours: The drama in the crypto market
The crypto market recorded sharp gains following a move by the US Treasury Department, which led to a short squeeze and liquidations on an unusual scale within 24 hours.
In August 2026, the crypto market recorded a sharp upward trend, with Bitcoin leading the trend and boosting the value of leading currencies. Behind the move was, among other things, a decision by the US Treasury Department to expand the government bond buyback program, which contributed to increasing liquidity in the markets.
According to a report by Crypto Jungle, the US Treasury Department announced its intention to double the volume of purchases under the Treasury Buyback program. As part of the move, the cap for each purchase operation of long-term bonds, in the 10 to 30-year range, was raised from $2 billion to at least $4 billion. The program is expected to begin operating in early September 2026.
This means that the US government is buying back bonds from the market and simultaneously injecting liquidity into the financial system. Such a move may encourage investors to seek investment avenues with higher risk, including the stock market and the crypto market.
However, the reaction in the crypto market was particularly sharp. The rapid rise in prices caught many traders holding short positions, i.e., bets on price declines. When Bitcoin and other currencies began to rise, leveraged positions began to close automatically.
A short squeeze is a situation where a sudden rise in price forces traders who bet on declines to buy the asset back to reduce their losses. This wave of forced buying further increases demand and drives the price up, which can lead to the closing of additional positions and create a snowball effect.
The result was the wiping out of positions totaling nearly $2 billion within 24 hours, the highest figure since February 2026. Of this amount, about $1.75 billion was related to short traders.
Bitcoin rose by more than 5%, crossed the $68,000 threshold again, and approached the $69,000 level. Short traders in Bitcoin alone suffered liquidations totaling more than $1.1 billion.
Ethereum also benefited from the move and recorded an increase of about 9%, crossing the $2,000 threshold and returning to levels not seen since early June 2026. At the same time, Solana and Ripple recorded increases of about 6%.
The event illustrates the risk inherent in leveraged trading. When a trader opens a short position, they are effectively betting that the asset's price will fall. If the forecast materializes, one can profit from the decline, but when the price moves in the opposite direction, losses can accumulate quickly. In the case of a leveraged position, the exchange may close the transaction automatically once the collateral is no longer sufficient.
Traders open short positions for various reasons. Some estimate that the asset is trading at too high a price and is expected to fall, others seek to profit from a negative trend, and large entities may use shorting also as a tool for hedging existing investments.
The recent event demonstrates how much the crypto market is influenced by macroeconomic events, even when they are not directly related to digital currencies. In this case, a change in the bond buyback policy in the United States contributed to an increase in liquidity, and the market's rapid reaction created a wave of forced buying that intensified the gains and simultaneously led to heavy losses for short traders.
