2019-12-19 13:08 |
Most of the liquidations that occurred on BitMEX on December 18 were short contracts. It shows that over-leveraged shorts were squeezed out, pushing the bitcoin price up so quick in a short time frame.
70% of liquidations were shortsAccording to Skew Research, the overwhelming majority of bitcoin contract liquidations on BitMEX were shorts.
The research firm said:
“Not that many buy liquidations despite bitcoin jumping nearly $1,000 yesterday 70% of liquidations were SELL in last three days despite bitcoin price unchanged! Longs seem more leveraged than shorts.”
BitMEX bitcoin short vs long contract liquidations (Source: Skew Research)
During a squeeze, a cascade of short or long liquidations send the bitcoin price up or down in an intense manner, often causing 10 percent movements on a single day.
On December 18, the bitcoin price rose from around $6,410 to nearly $7,500, by almost 17 percent within a matter of hours.
Based on the performance of BTC over the past several months, it has become more evident that most short-term movements are caused by margin trading platforms like BitMEX.
Long-term price movements are swayed by fundamentals and growth of the cryptocurrency industry that supplements the trend of bitcoin.
Why did bitcoin shorts stack up?At one point, rumors spread that a well-known Chinese scam is preparing to dump almost $100 million worth of Ethereum as reported by NewsBTC.
If the price of a major cryptocurrency such as Ethereum plunges in a short period, it will naturally affect bitcoin and other large market cap cryptocurrencies.
Datamish shows BitMEX short liquidations dominated throughout the past 6 hours (Source: Datamish)
However, as the numbers of shorts started to increase rapidly and affected the funding rate of BitMEX, it left shorts vulnerable to a sharp reversal to the upside.
In the short-term, the momentum gained by bitcoin through the overnight rally to $7,490 could set the dominant cryptocurrency up for an actual relief rally following a 50 percent drop since July.
In mid-2019, the price of BTC was hovering at $13,900 and the price has halved since.
The post BitMEX Liquidations Shows Why Bitcoin Abruptly Surged by $1,000 Overnight appeared first on NewsBTC.
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