Bitcoin, Ethereum Surge As $430M Short Squeeze Fuels Rally

Data shows the cryptocurrency derivatives market has faced a high amount of short liquidations following the rallies in Bitcoin and Ethereum.

Crypto Market Liquidations Have Crossed $535 Million

According to data from CoinGlass, liquidations have piled up on cryptocurrency derivatives exchanges following the market volatility of the last 24 hours. “Liquidation” here refers to the forceful closure that any open contract undergoes after it has amassed losses of a certain percentage (as specified by the platform).

Below is a table that shows the relevant numbers related to the latest liquidations in the cryptocurrency sector.

The data for the latest crypto market liquidations | Source: CoinGlass

In total, the market as a whole has suffered nearly $547 million in liquidations over the past day. Out of these, $446 million in contracts involved were short positions. This means that investors betting on a bearish outcome made up for over 81% of the liquidations. The dominance of short liquidations is naturally down to the fact that Bitcoin and other assets have gone up during the past day.

When broken down in terms of the individual symbols, BTC-related contracts appear on top, with $229 million worth of them getting flushed inside this window.

The liquidations heatmap related to the crypto market | Source: CoinGlass

As is usually the case, Ethereum followed Bitcoin in second with $136 million in contracts involved. But interestingly, the third-largest asset in this metric wasn’t one of the usual suspects, but rather RaveDAO (RAVE), the asset currently ranked 27th by market cap. RaveDAO observing significant liquidations of $45 million is likely a result of the sharp 62% jump that it has witnessed over the last 24 hours.

A Mass liquidation event like today’s is popularly known as a squeeze. Since this squeeze involved bearish bets in the majority, it would be called a short squeeze. A property of a squeeze is that it involves a cascade of liquidations; an initial sharp swing in the price causes a market flush, which ends up feeding back into the price move, leading to further liquidations. As such, these events tend to be violent.

Liquidation squeezes aren’t exactly a rare sight in the cryptocurrency market, owing to the fact that coins can be volatile on a regular basis and positions tend to be overleveraged. Thus, while some positions have been flushed in the latest squeeze, it doesn’t mean that the risk of further liquidations has gone away.

The next investors affected could be those going long. As analytics firm Santiment has pointed out in an X post, the Ethereum Funding Rates have turned positive across exchanges, indicating the market balance has shifted toward long positions.

Looks like the value of the metric has shot up in recent days | Source: Santiment on X

Generally, a squeeze is more likely to affect the side of the market that’s more dominant. Since the Funding Rates currently point to that side being the bullish investors, it’s possible that they could end up getting wrapped in a squeeze, should more volatility emerge.

BTC Price

Bitcoin pulled back to $70,500 on Monday, but the coin has kicked off Tuesday with a surge to $74,300.

The trend in the price of the coin over the last five days | Source: BTCUSDT on TradingView

Featured image from Dall-E, chart from TradingView.com

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