The movement of bitcoin (BTC) above $ 94 thousand on the morning of April 23 caused a cascade of liquidation of trading positions, mainly aimed at reducing the price (short) of BTC. The total volume of liquidated trading positions amounted to about $650 million.
Of these, about $565 million were bets on lowering the price, $ 300 million of which was for the fall in the price of bitcoin. According to Presto Research analyst Rick Maeda, quoted by Decrypt, "this volume has become the largest since 2022."
Maeda suggested that the liquidation cascade is a classic short squeeze, in which rapid growth forces short traders to close their trades, which further accelerates the upward movement of prices.
Maeda also added that liquidity in today's markets is "still relatively low compared to the peaks of the bull market," which could also affect volatility.
On April 23, Bitcoin (BTC) quotes reached a seven-week price high, exceeding $94.5 thousand. Later, the price of BTC rolled back below the level of $93 thousand. The increase since the beginning of the week was about 9%, and from the minimum price in April ($74.4 thousand on April 7), quotes increased by more than 24%.
A short position is the sale of securities, currencies, or commodities that a trader does not own and borrows them from a broker. A trader opens a short position hoping to buy back assets (such as stocks) after a price drop and thereby capitalize on the decrease in value. In this case, they say that he is playing short or short. When closing a short, the trader actually buys back the borrowed volume, which also creates additional demand for the asset.
Liquidations occur when the price moves against a trader's position with leverage and the exchange forcibly closes it at a loss due to a lack of collateral.
For example, if a trader opened a $1,000 long with 10x leverage, actually using $100 of his own funds, and borrowing the remaining $900 from the exchange, then a 10% drop in the bitcoin price would reduce the value of the position to $900. The exchange automatically liquidates the transaction in order to return the borrowed funds, and the trader will lose all his capital if he did not have additional funds to maintain the position.
According to Pat Zhang, head of research at the WOO X cryptocurrency trading platform, over the past week bitcoin "continued to record new local highs along with gold." According to the expert, this highlights the tendency to abandon risky assets in favor of hedging instruments against macroeconomic instability.
Zhang also noted the institutional interest in bitcoin, referring to reports that the American bank Cantor Fitzgerald, together with the crypto company Tether, SoftBank Corporation and the Bitfinex crypto exchange, is planning to launch a separate company to buy bitcoin.
Cantor Fitzgerald plans to create a $3 billion bitcoin fund, the Financial Times reported, citing sources familiar with the plans, according to which Tether is ready to provide bitcoins for $1.5 billion, SoftBank - for $ 900 million, Bitfinex — for $ 600 million. The assets are planned to be converted into shares of 21 Capital at $10 per paper, which is equivalent to an estimate of $85,000 per BTC.
We are talking about launching a new structure called 21 Capital, which can become a public alternative to the investment strategy of Strategy (formerly MicroStrategy). The foundation will be based on investments in bitcoin from partners.
Such a development could lead to a significant influx from institutional users, Zhang believes, which would "lay the foundation" for the BTC price to rise above $150,000.
