Bitcoin STHs realize gains: Correction or short squeeze, what’s ahead?

The current market setup is approaching an inflection point where bulls will need to step up. From a technical perspective, Bitcoin’s [BTC] 2.57% rally on the 17th of April pushed the price back above $76k, with the upper wick reaching $78k, a level BTC hasn’t tested in over 70 days. Now trading roughly 4% below the $80k mark, on-chain pressure is starting to build. As shown in the chart below, BTC perfectly bounced from the realized price of the 18m-2y long-term holder (LTH) cohort near $62k. In fact, price has now moved above the cost basis of the 1m–3m short-term holder (STH) cohort around $75,620. However, this remains a key zone where supply typically increases.  The logic is straightforward: STHs are usually the first to sell once Bitcoin trades above their cost basis, locking in profits. And this time, even though BTC is only about 2.6% above this level, the ongoing profit-taking suggests traders are already positioning for potential overhead resistance near the $80k area. In this environment, many market participants prefer securing gains rather than risking a pullback that could compress profits. Therefore, for the rally to maintain strength, bulls now need to absorb this selling pressure; otherwise, momentum could stall before BTC gets a clean shot at an $80k breakout. Interestingly, the timing couldn’t be better for Bitcoin bulls. Rising Bitcoin shorts could fuel a squeeze toward $80k With realized profits continuing to pile up, betting on Bitcoin’s downside may seem like a logical move.  Notably, Bitcoin’s technical setup also supports this narrative. On the daily chart, BTC’s RSI has climbed to a three-month high, approaching the 75 level. This move comes after Bitcoin’s nearly 10% rally from the $70k level, when RSI was sitting in a neutral zone. In simple terms, BTC is now moving into overbought territory, a sign of strong momentum, but also a condition that increases the risk of short-term cooling. At the same time, Bitcoin shorts appear to be getting more aggressive. As shown in the chart below, BTC funding rates remain deeply negative. In fact, negative Funding Rates jumped nearly 400%, dropping from −0.003 the previous day to −0.0148 on the 17th of April, just as BTC rallied roughly 2.5% toward $78k. Taken together, an overbought RSI, short-term holders locking in gains, and persistently negative Funding Rates, the setup explains why betting on Bitcoin’s downside currently looks reasonable, with bears expecting resistance before a clean move above $80k. However, if bulls step in and absorb the selling pressure, this same setup could quickly flip into a bear trap. From an institutional angle, over $650 million has recently moved into Bitcoin ETFs, with BlackRock’s IBIT accounting for nearly 45% of total inflows. Alongside a positive Coinbase Premium Index (CPI), this suggests bid support is still present beneath the market. If risk appetite remains strong, BTC pushing past $80k on the back of a short squeeze looks increasingly likely for now. Final Summary Rising profit-taking and aggressive short positioning place Bitcoin at a key inflection point near $80k resistance. Strong ETF inflows and underlying bid support could turn bearish positioning into a short squeeze-driven breakout.