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Bitcoin is Jumping Over $7.1k, Liquidating $23M on BitMEX

On early Thursday, the price of Bitcoin (BTC) spiked near $500. As a result, it ignites liquidations worth millions on crypto derivatives exchange BitMEX.

The highest cryptocurrency by market value picked up a bid around $6,650 and increased to a high of $7,145 in the 90 minutes to 8:30 UTC. Also, the unexpected move forced liquidations of futures worth $23 million on BitMEX.

In addition to that, the total liquidation volume seen during that timeframe was significantly higher compared to the three-day hourly liquidation average of $1.6 million.

Sell liquidations happen if a market moves against long positions and breaches a predetermined limit. With this, it forces BitMEX’s liquidation engine to liquidate or sell long positions. Then, buy liquidations occur when prices move against short positions. This forces the liquidation to square off bearish bets.

And while both long and short positions were liquidated, over 93 percent of the overall liquidations of $23 million were of short positions. (sign leverage skewed to the downside).

Bitcoin has declined to lows under $6,500 in the early Asian trading hours, having to experience many rejections above $7,000 during the past several days. Also, Asian equity markets were reflecting red at that time, tracing overnight losses on Wall Street.

Thus, it is not surprising to see the majority of positions on BitMEX tilted to the bearish side.

More importantly, every unexpected and sizeable price moves almost always end up in the forced unwinding of long or short positions. And in turn, it adds to the downward or upward pressure on prices.

For example, as Bitcoin dropped under $6,000 in the early U.S. trading hours on March 12, BitMEX squared off to almost $700 million worth of long positions. And that might exaggerate the bearish move, delivering prices on to lows below $5,000.

 

Moving Away from Positions

Meanwhile, Bitcoin further moves roughly in tandem with futures linked to Wall Street’s equity index, the S&P 500.

The cryptocurrency went down from $6,900 to $6,600 on Wednesday’s U.S. trading hours. At the same time, stock markets put in a negative performance on the back of a record fall in consumer spending, as represented by retail sales.

Also, on early Thursday, sentiment stayed weak, with Asian markets tracking Wall Street lower. But the S&P 500 futures brushed off losses and boosted by 0.8% after European stocks opened on a positive note.

Moreover, risk sentiment has reportedly stabilized because of world leaders taking steps to reopen economies pounded by the coronavirus pandemic.

Bitcoin followed suit by displaying highs more than $7,100. And it took the month-to-date gains to 9.6 percent. During press time, the crypto is switching hands to almost $7,040, representing a 6 percent gain during the day.

The sharp volumes and looks to have legs backed BTC’s most recent upward move. Furthermore, the highest buying volume since April 2 accompanied the $400 uptick to $7,000 – marked by an arrow -, based on the Bitstamp data.

Still, the crypto must print a strong hourly close over the top end of the descending channel. And if there will be a confirmed breakout, this would likely invite more robust chart-driven buying. As a result, this will lead to a re-test of recent highs near $7,500.

If Bitcoin finds acceptance below $6,695 – the low of the recent high-volume bullish candle -, the outlook for this will turn bearish once again.

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