Massive Short Liquidations Wrecked as $200M Bitcoin Purchase Rocks Markets

• Investors betting against Bitcoin grew to some of the highest levels on record as markets welcomed the new year.
• A purchase of roughly $200 million in Bitcoin on spot trading markets was enough to force massive short liquidations due to dwindling volume.
• Long liquidations dominance rose to the highest levels in over two years as those betting against Bitcoin lost out.

As the new year began, investors betting against Bitcoin reached some of the highest levels on record. Bears seemed to be in control of the price action and Bitcoin teetered around $16,000. However, analysis from CryptoSlate revealed that those shorting Bitcoin were not as powerful as first thought.

A purchase of roughly $200 million in Bitcoin on spot trading markets was enough to cause mass liquidations of short positions due to the dwindling volume. In addition, large trades executed on major exchanges moved the needle just enough to create a brief short squeeze that took Bitcoin from $16,800 to over $21,000.

The below chart shows the futures long liquidations dominance (i.e., long liquidations / (long liquidations + short liquidations)). The 50% mark in the middle of the chart represents an equal amount of long and short liquidations. Values above 50% indicate more longs liquidated, and values below 50% indicate more shorts being liquidated.

Long Liquidations Dominance: (Source: Glassnode)

The liquidation became dominated by failing short positions that were ‚wrecked‘ by Bitcoin’s price increase. Over two years, the dominance rose to the highest level as those betting against Bitcoin lost out. The situation was so dire that many investors in the Bitcoin market had to accept their losses and move on.

The effect of the short squeeze had a significant impact on the Bitcoin market. The sudden surge in price caused buyers to flock to the markets, which in turn caused the price to skyrocket. This event was a reminder to investors that Bitcoin is a volatile asset and that betting against it can have disastrous consequences.

In conclusion, the Bitcoin market was able to demonstrate its resilience in the face of a bearish onslaught. As investors continue to bet against Bitcoin, it is important to remember that the markets can change quickly and those betting against the cryptocurrency could be in for a rude awakening.