Bitcoin bounced from a $74,192 low to $77,000 on May 23 after the US president said a memorandum of understanding with Tehran was close to signing and the Strait of Hormuz would reopen. Short sellers caught the worst of the reversal.
Bitcoin closed the week at $77,000, up 1.4 per cent over twenty-four hours and roughly $2,800 above the local low it printed on Friday. The catalyst was a Saturday statement from US President Donald Trump that a memorandum of understanding with Iran on ending the Strait of Hormuz crisis had been "largely negotiated" — and that the Strait would be reopened under its terms. Within thirty minutes of the headline, more than $180 million in short positions on centralised derivatives venues were liquidated.
The reversal was sharp because the positioning was crowded. Bitcoin had traded down through $75,000 for the first time in roughly a month earlier in the week, dragged by a combination of geopolitical risk premium, US ten-year yields above 5.1 per cent and a fresh round of ETF outflows. The Friday session pushed BTC to an intraday low of $74,192 on Bitstamp before bidders stepped in. Total crypto market capitalisation has since recovered by approximately $75 billion.
Trump's framing matters more than the agreement's specifics, which are not public. He said the talks have produced a "Memorandum of Understanding pertaining to PEACE" with the Strait of Hormuz reopening as a core term. Iranian Foreign Ministry spokesperson Esmaeil Baghaei confirmed the two governments were close to signing. Steve Witkoff and Jared Kushner are the named US envoys; Pakistan and Qatar are the mediators. Nothing has been signed.
The Strait carries roughly a fifth of global seaborne crude, and bitcoin's correlation with oil and risk assets has tightened markedly since the conflict escalated in April. A reopening removes the tail risk that had been priced into both the front-month WTI contract and the BTC perpetual basis on Binance and OKX, where funding rates had flipped persistently negative for the first time since the 22 per cent quarterly drawdown bitcoin posted in Q1.
The liquidation cascade was a mirror of the one that took prices down in the first place. Coinglass data showed the recent crash had cleared $584 million of long positions in the four hours preceding Friday's low, with $657 million wiped in the rolling twenty-four-hour window. Saturday's bounce reversed the polarity — bears who had positioned for a break of $74,000 were closed out at market as the price ripped through $76,000 on thin weekend liquidity.
The damage to retail leverage traders has been compounding for months. Serial high-leverage trader Machi Big Brother — the alias of entrepreneur Jeffrey Huang — was wiped out in Friday's drop and immediately opened a fresh 25x long on 1,825 ETH with a liquidation price of $2,086.69. On-chain estimates put his cumulative twelve-month losses at roughly $77 million; his remaining balance, according to Arkham, is around $100,000.
Polymarket priced the underlying probability higher than spot markets did. The contract on a US-Iran peace deal being signed before the end of June cleared $154 million in open interest on Friday, with implied odds running well ahead of where bitcoin and equity volatility were positioned. Traders who had hedged the geopolitical risk through the binary contract had less reason to liquidate when the headline hit, which partially explains the speed of the bounce.
Macro positioning will determine whether the recovery holds. Treasury yields have not retreated, the dollar index closed the week firmer, and the next FOMC meeting in June is now priced for a hold. The bull case rests on the peace memorandum actually being signed and ETF flows turning positive after a week in which BlackRock's IBIT and the broader spot complex bled $648 million in a single session on May 18.
The bear case rests on the same variables going the other way. A collapse in talks or a fresh incident in the Gulf would push bitcoin back through Friday's low quickly — and the leverage that built into the Saturday bounce is now positioned the opposite way.
Altcoins ran harder than bitcoin. Ether traded back above $2,150 by Saturday afternoon, with Hyperliquid's HYPE token extending a 23 per cent twenty-four-hour gain that took it near $47 — a fresh weekly high. Privacy coins and AI-themed tokens also outperformed, consistent with a capital rotation that was already underway before the Iran headline arrived. Hyperliquid in particular has decoupled from broader market beta over the past month; the platform's perpetuals book has become the dominant venue for the leveraged trades that bitcoin's spot move is now reflecting.
What the weekend did not change is the underlying capital structure. Spot ETF flows remain the dominant variable for bitcoin's medium-term direction, and the Friday and Monday windows around the Iran headline will be the read most institutional desks watch closely. A single $180 million short squeeze on weekend liquidity is not a structural bid — it is a derivatives event that needs spot demand to validate it on Monday.
Bitcoin opened Sunday at $77,140.
