Bitcoin’s resurgence leads to over $500 million in short liquidations

De crypto-markt as a whole experienced an unprecedented revival in the past week. This revival reclaimed the total market cap of $1 trillion, causing many short positions to fail. A total of over $500 million worth of short positions were liquidated.

What is a short position?

With a short position, traders essentially bet on a decline in the Bitcoin price. Essentially, it involves borrowing a Bitcoin and then selling it. At a certain point, you have to return that Bitcoin. As long as the price drops, this is favorable for someone with a short position, as they can buy back and return the Bitcoin for less money.

When the Bitcoin price rises, shorts encounter problems. Once the price rises to a point where the accounts of the short holders are no longer sufficient to cover it, the short positions are automatically closed. This is referred to as liquidation. Since Friday, a total of $500 million worth of shorts have been liquidated, according to Coinalyze data. The highest number of liquidations since October 2022.

The bull is back

The major cryptocurrencies gained a 20 percent price increase in the past week. Bitcoin managed to reclaim a price of $21,000 during this upward trend and is now trading slightly below that. This upward price movement was mainly supported by positive inflation data from the United States. Inflation is decreasing overall, but with a Consumer Price Index (CPI) of 6.5 percent, the Federal Reserve’s target is still far from sight.

What made the inflation figures even more positive is that housing prices are a significant factor in the slightly elevated 6.5 percent score. There is a delay of several months in that regard due to the way they measure it. In that sense, it is quite possible that inflation will truly return to the 2 percent range in the coming months. This would be a welcome decrease for the market and strengthen the narrative for a new bull market.

Paula

Paula onderzoekt met kritisch oog de markt van de automatische crypto trading platformen en schrijft algemene artikels over de wereld van de cryptovaluta.