Rising Bitcoin prices cause a cascade of short liquidations, the highest ratio of short-wipeouts since July 2021-market tactualizations
Rising Bitcoin prices cause a cascade of short liquidations, the highest ratio of short-wipeouts since July 2021-market tactualizations
The two largest crypto assets have risen significantly in the past seven days, with Bitcoin rising by 22.6 % and etherum by 18.6 % compared to the US dollar. According to market data, both crypto-assets recorded the largest increase on Saturday, January 14, 2023. According to a current alpha report from Bitfinex, the sudden increase in value caused the highest ratio of short liquidations to long liquidations since July 2021.
Bitfinex analysts see a cautious approach of the bulls, since the market remains highly illiquid despite the price increase
bitcoin (btc) and ether (ETH) The prices have increased significantly compared to the US dollar, which led to a cascade of short liquidations on January 14th. The Bitfinex cryptocurrency exchange discussed the matter in its most recent issue alpha-report no. 37 . If a dealer opens a short position against Bitcoin or Ethereum, he expects the price of the crypto-assets to drop in the future.
If the price of Bitcoin rises quickly, short dealers are either liquidated or have to buy Bitcoin back at a higher price. If the price of bitcoin or eth too much increases, empty sellers are liquidated, which means that their short position is closed by the crypto derivate exchange. According to Bitfinex researchers, a considerable number of liquidations took place on January 14th.
"Short liquidations have fueled the entire increase in Bitcoin and Ethereum," said Bitfinex analysts in the alpha report. "Short liquidations of $ 450 million outweighed long liquidations with a ratio of 4.5. On January 14, the market recorded the highest ratio of short liquidations since July 2021," added the analysts. They also mentioned that the liquidation figures and the short vs. Long liquidation ratio were even stricter in old coins.
The analysts from Bitfinex further stated that a decline in the Bitcoin price is still likely. "While it is typical for bear markets that there is a complete extinction of shorts," the analyst noted. "The entire rally was built on the backbone of continuous market shorts that keep the financing low and the prices drive up due to forced liquidations and ongoing stops. So a withdrawal of the Bitcoin price remains possible."
The alpha report adds:
Although the movement could be interpreted as organically interpreted, it is completely developed by limited dealers on the market, which emerges from the market depth that remains the same week after week. The price effect of Market Orders is also the same as in the last week for [Bitcoin], and there is little change for old coins. This means that the market remains extremely illiquid even with increasing tendency, and given the strong decline in the open interest at the weekend, the bull's carefully approached can be expected with a pullback.
crypto supporters debate about the Gartner hype cycle position and the "unbelief" phase
When the liquidations took place three days ago, Bitfinex reported that Bybit has experienced the largest short-open interest-wipeout since its foundation. "The negative financing rates below $ 16,000, followed by an increasing aggregated long-side open interest for [Bitcoin] the driving force behind the price increase," said the researchers.
The recent increase in Bitcoin and Ethereum prices has caused many people to speculate whether the crypto floor has been reached. On January 16, 2023, Bitcoin analyst Willy Woo shared an illustrated picture of Gartner Hype Cycle and I suspect that we are in the 'unbelief' phase of the cycle. "
A number of people disagreement Woo's opinion that he was in the phase of "unbelief" of the cycle. Crypto supporter "Colin Talks Crypto" replied to Woo and said: "Under no circumstances." Colin continued to emphasize that this would "mean that the typical bear market is massively shortened (which is highly unlikely, especially in today's bad macroclimate)". The crypto supporter and YouTuber added:
It would mean that a 4-year cycle from Bitcoin was somehow magical for a 2-year cycle or so.
What do you think about the Bitfinex alpha report and the short liquidations that have taken place this week? Do you think we are in the "unbelief" phase of Gartner Hype Cycle? Let us know your opinion on this topic in the comment area below.
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