Short Liquidations Are on the Rise As Bitcoin Rallies

Short Liquidations Are on the Rise As Bitcoin Rallies

2 years ago

Liquidations in longs reached a high at the start of December last year as Bitcoin prices tumbled, but the tide appears to be shifting. Will the momentum last or will it be a dead cat bounce?

Short Liquidations Are on the Rise As Bitcoin Rallies

The last three months have been a tumultuous time for the cryptocurrency industry, with many popular digital assets falling from their highest ever prices and losing a significant value in this time.

Led by Bitcoin, which fell from its all-time highest value of $68,789 in early November down to under $34,000 in January — equivalent to a decline of more than 50%. Most altcoins, on the other hand, were hit far harder, with losses of 70-90% seen almost across the board.

This time has been marked by a large number of major liquidation events, with seven events wiping out more than $500 million in longs in a single sweep. The largest among these occurred in early December, with a whopping $1.6 billion in longs liquidated as Bitcoin was sent tumbling below the crucial support threshold of $50,000, with other altcoins following suit.

But as of late January, the tide appears to be turning, and the ratio of short to long liquidations is beginning to appear bullish, with smaller long liquidations and larger short liquidations taking place in the last month. At the same time, Bitcoin has rallied strongly and recently passed through the $45,000 resistance, indicating an overall change in market sentiment.

This is echoed by the Crypto Fear & Greed index, which has now transitioned from a state of extreme fear a month ago at 21, to neutral today at 50. This is now closing in on its highest number since November 2021.

With speculation of a so-called Bitcoin supercycle heating up, there is good reason to believe that an even stronger short squeeze may be on the way, with Bitcoin and other prominent cryptocurrencies potentially on the cusp of a strong further leg up.

This article contains links to third-party websites or other content for information purposes only (“Third-Party Sites”). The Third-Party Sites are not under the control of CoinMarketCap, and CoinMarketCap is not responsible for the content of any Third-Party Site, including without limitation any link contained in a Third-Party Site, or any changes or updates to a Third-Party Site. CoinMarketCap is providing these links to you only as a convenience, and the inclusion of any link does not imply endorsement, approval or recommendation by CoinMarketCap of the site or any association with its operators. This article is intended to be used and must be used for informational purposes only. It is important to do your own research and analysis before making any material decisions related to any of the products or services described. This article is not intended as, and shall not be construed as, financial advice. The views and opinions expressed in this article are the author’s [company’s] own and do not necessarily reflect those of CoinMarketCap.
8 people liked this article