Bitcoin managed to surpass the $65,000 mark with ease in today’s trading session, leaving behind disappointed traders who were expecting a pivot around $64,000.
There was anticipation in the air that Bitcoin might experience a pullback around or just below the $65,000 threshold.
Considering Bitcoin’s continuous rally since the second week of September, it was natural to expect some profit-taking to occur at this juncture.
These anticipations triggered a rise in short positions, catching many traders off guard as the prices surged relentlessly.
Hyblock Capital data shows a significant increase in short positions over the last three days, which was not a random occurrence, as Bitcoin’s bullish momentum seemed to falter between September 20 and 23.
Many interpreted this as a potential sign for the bears to stage a takeover.
The notable surge in net shorts on Binance on September 23 was followed by a spate of short liquidations.
A similar spike happened the next day but with fewer liquidations recorded.
Furthermore, CryptoCrypto reported another surge in shorts on September 26, culminating in a sharp rise in liquidations.
Yesterday’s Bitcoin liquidations ensued as the price veered unexpectedly in the opposite direction, catching shorts off guard and triggering the liquidation process.
This trend aligns with a prior observation suggesting that long-term holders refrained from cashing out while miner reserves continued to accumulate.
Evaluating Bitcoin’s Leverage Exposure
The heavily leveraged shorts found themselves in a precarious situation as the liquidations sparked a short-squeeze scenario.
Data from CryptoQuant indicated that the estimated leverage ratio saw a significant rebound post its August dip, reaching levels unseen since October 2023.
Furthermore, CryptoQuant’s metric on short liquidations revealed a striking 591% increase in the number of shorts liquidated in the last 24 hours.
During this period, approximately 635 shorts were liquidated, a far cry from the spike of 12,118 shorts witnessed on September 20.
The short-squeeze and consequent liquidations highlight Bitcoin’s current susceptibility and response to leverage dynamics. While potential downside risks remain for BTC’s price, the impact might be curtailed if long-term holders persist in HODLing.
Despite the prevailing bullish sentiment, caution is advised for traders, given the market’s propensity for sudden shifts.
Bitcoin remains susceptible to high volatility, particularly with the looming election period on the horizon, poised to be the next significant event influencing the crypto landscape.