Key Points
- Bitcoin’s price has been heavily influenced by short liquidations and leverage this month.
- Despite the bullish sentiment, traders are advised to proceed with caution due to potential market volatility.
Bitcoin’s Exposure to Leverage
Bitcoin has seen significant exposure to leverage this month. This has been particularly evident in the impact of heavy shorts liquidations on Bitcoin’s price performance.
During the day’s trading session, Bitcoin comfortably pushed past $65,000. However, this came at a significant cost to traders who anticipated a pivot in the $64,000 price range.
Expectations and Reality
Many traders expected Bitcoin to experience another retracement at or near the $65,000 level, given its rally since the second week of September. This anticipation led to an explosion of short positions, which were caught off guard as prices continued to rally.
Data from Hyblock Capital shows spikes in short positions over the past three days. This coincided with signs of declining momentum from Bitcoin bulls between the 20th and 23rd of September.
There was a significant spike in net shorts on Binance on the 23rd of September, followed by a spike in shorts liquidations. Another spike occurred the following day, with fewer liquidations.
Leverage and Liquidations
The shorts may have been heavily leveraged, triggering a short-squeeze situation. CryptoQuant data revealed that the estimated leverage ratio rebounded sharply after a dip in August. The last time Bitcoin’s estimated leverage ratio was this high was in October 2023.
CryptoQuant’s short liquidations metric showed that the number of shorts liquidated in the last 24 hours was up by 591%, amounting to roughly 635 shorts. This is significantly less than the number of shorts liquidated on the 20th of September, which peaked at 12,118.
Despite the current bullish sentiment, traders are advised to move cautiously. The crypto market could change at any time, and Bitcoin is still subject to heavy volatility, especially with the upcoming election period.
