Bitcoin came close to $87,000 before returning to around $85,000, after an increase largely amplified by the liquidation of short positions. Around a billion dollars worth of leveraged bets were closed immediately in the crypto market.
In brief
- Bitcoin came close to $87,000 before returning to around $85,000.
- Nearly $1 billion in positions were liquidated in 24 hours.
- Short positions accounted for the bulk of the liquidations, fueling a powerful short squeeze.
- Forced buybacks accelerated Bitcoin’s rise in a matter of hours.
- The $88,000 and $80,000 to $82,000 areas become the main levels to watch.
Nearly a billion dollars liquidated in 24 hours
From nearly $75,000 last week, bitcoin rose to an intraday high of $87,000. This level, unprecedented since January, took investors who were banking on a continuation of the correction by surprise.
The various data evolved throughout the session. An initial estimate indicated $746.6 million in liquidated positions, including $647.9 million in short bets. Then, the balance sheet exceeded a billion dollars, according to the figures provided.
The essential figures justify the scale of this liquidation:
- Approximately $1 billion in positions were closed;
- Nearly $900 million was in short positions;
- More than 139,000 traders suffered liquidation;
- The largest individual position exceeded $20 million;
- Bitcoin peaked at $87,000 before returning towards $85,000.
The total of $900 million indicates that short positions made up almost 90% of the amounts liquidated during the most recent reading. Exclusively for bitcoin, 454 million dollars were recorded for short positions liquidated, compared to only 53 million long positions.
Liquidations accelerated bitcoin’s progress
A short position can allow a trader to bet on a decline in price. When he uses leverage and the market moves too strongly, his guarantee is no longer sufficient to cover the loss. The exchange therefore immediately closes its position.
Such a closure usually involves a redemption of bitcoin or the relevant contract. These forced acquisitions support the price, trigger further liquidations and cause a cascading movement. Thus, this phenomenon is called short squeeze.
During the first wave, bitcoin rose from $81,525 to over $85,250 in two hours. After a temporary decline towards $81,150, a second increase pushed the price to $86,332, then $87,000.
The excess of $82,000 served as the trigger. This area has blocked multiple recovery attempts since the beginning of September. Once this resistance was crossed, bitcoin approached $84,000 in less than five minutes.
However, a billion dollars of liquidations does not equate to a billion dollars of new capital invested in cash. This amount constitutes the notional value of the closed positions. Above all, it measures the vulnerability of indebted traders to rapid market fluctuations.
The return of bitcoin towards 85,000 dollars shows the limits of the movement
Bitcoin gave up part of its gains and stabilized around $85,000, after reaching $87,000. This decline does not automatically call into question the recovery, however it confirms that forced buybacks cannot support the price indefinitely.
The statistics also reveal that the market has not reduced its exposure to risk. Derivatives open interest moved 7.59% to $156 billion, even as hundreds of millions of positions were liquidated. Meanwhile, one-day volume jumped 39% to $224 billion.
Such a combination indicates that new traders quickly replaced closed positions. The leverage therefore remains high. If bitcoin falls suddenly, open long positions would in turn suffer a cascade of liquidations.
Nevertheless, spot demand participated in this movement. According to Glassnode, buyer flows on the spot and perpetual markets have become positive again. Acquisitions therefore did not come exclusively from automatic closures of short positions.
The levels of 88000 and 82000 dollars become decisive
The next resistance is around $88,000. Numerous analyzes identify an important selling zone at this level. A lasting crossing would put the thresholds of 90,000 then 95,000 dollars back at the center of expectations, without guaranteeing that they will be reached.
Conversely, the area between $80,000 and $82,000 now represents the main short-term support. Its abandonment could weaken the recovery and expose recently opened long positions.
The evolution of liquidations, open interest and spot purchases will be more important than just the one-time move to $87,000. An increase accompanied by a decline in leverage could present a more solid basis than a new increase mainly fueled by forced closes.
Maximize your Tremplin.io experience with our ‘Read to Earn’ program! For every article you read, earn points and access exclusive rewards. Sign up now and start earning benefits.
