Bitcoin steady as equities ignore Iran, short squeeze risk grows
Bitcoin and US equities are shrugging off direct US-Iran military strikes, leaving bears exposed to a potential equity short squeeze and positioning the cryptocurrency to outperform stocks.
Bitcoin traded at roughly $65,975 on Wednesday, down 1% on the day after hitting a five-week high near $67,000. The token's muted reaction mirrored broader US equity markets, which continued to rally despite direct military strikes between the US and Iran.
President Donald Trump explicitly warned in a post on Truth Social that any Iranian attacks on shipping in the Strait of Hormuz would trigger retaliation against infrastructure in Tehran. “The United States will bomb and destroy ONE BRIDGE OR POWER PLANT, including those located next to, or in, the Capital City of Tehran,” he wrote. While equities and crypto digested the escalation, energy markets reacted sharply. WTI crude reached $88.60 and Brent hit $95.50, marking the highest prices for both benchmarks since June 11.
The continued resilience of US stocks is creating a highly precarious situation for investors betting on a reversal. Short interest in the S&P 500 has climbed to roughly 3.7% of its free float, nearing the highest level in data going back to 2010. Short interest in the broader Russell 3000 sits near an all-time high of 6.1%. Both metrics have risen steadily since the start of 2025. This accumulation of short positions means any further upward momentum in equities could trigger a violent short squeeze, forcing bears to buy back shares at a loss and amplifying the rally.
Against this backdrop, some market participants anticipate Bitcoin will begin to decouple from and outperform traditional equities. The cryptocurrency's 24-hour trading volume remained robust at over $30.3 billion. Attention is fixed on the $67,000 threshold, a level that traders view as a critical technical breakpoint.
“Breaking above that point would make for a daily bullish market structure break putting in a higher high,” trader Daan Crypto Trades noted. “This is the first daily higher high since the push up in May.”
Separately, an analysis by trader Osemka highlighted a strong weekly bullish divergence in Bitcoin's performance relative to US stocks, pointing to an impending breakout in the relative strength index. “$BTC should outperform the US stock market nicely for the foreseeable future from the most mis-priced territory in history, as the lows should already be in,” Osemka wrote. This technical optimism aligns with a broad consensus that Bitcoin's next significant bear-market low is not imminent, giving it a potential structural edge over equities if a stock market squeeze materializes.
