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Bitcoin Surprisingly Jumped to $10,200, Liquidating $75M

The price of Bitcoin (BTC) spiked to as high as $10,272 on July 26, 2020, in an unexpected weekend rally. It also liquidated $74 million worth of long contracts on BitMEX, catching a lot of traders off guard.

It seems like there are two main reasons behind the abrupt upsurge of Bitcoin from $9,700 to more than $10,200. These are the liquidation of over-leveraged shorts and traders getting profits from over-extended alternative cryptocurrencies or altcoins.

As the BTC price began to rally, major altcoins, as well as well-performing DeFi tokens, started to slump. Ethereum (ETH) fell from $322 to $311, and DeFi tokens, including Aave and YFI, saw deep rejections.

The simultaneous rejections of major altcoins and the sudden price surge of Bitcoin signal that traders took profit from recent altcoin rallies. While traders move their altcoin gains to Bitcoin, it might have triggered a BTC uptrend as altcoins drop.

For instance, ETH increased from $247 on July 23 to $322 on the day’s peak, marking a 30% gain. Even with the strong sentiment around altcoins, investors may take a more careful approach by hedging their gains.

Aside from that, when Bitcoin initially breakthrough $10,000, it fueled over-leveraged short contracts to become liquidated. Then, when it reached $10,200, it caused a cascade of liquidations to happen, equaling $74 million.

Before that, Bitcoin had seen many phases when over $50 million worth of short or long contracts got liquidated. However, for this to happen within a span of several hours is less typical.

The mass liquidations of long contracts at $10,000 hints that the $10,000 to $10,200 stays a heavy resistance area. And as soon as Bitcoin touched $10,200, the price declined under $10,000, recording a short-lived rally.

 

Near-Term Price Trend

While the price of Bitcoin recovered strongly in recent weeks, a few industry executives and investors showed optimism toward BTC and ETH.

Grayscale CEO Barry Silbert tweeted, “Are you ready?” after Ether price broke out of the dreaded $280 resistance level on July 25.

Meanwhile, well-known trader Peter Brandt expects Bitcoin’s price to reach a new record high and eventually go to $50,000.

Brandt stated, “That is actually where my head is. Massive symmetrical triangle in $BTC points to ATHs, then $50k.”

But still, several variables might affect the short-term price trend of the BTC price. First, they projected the funding rate of Bitcoin to be more than 0.04% on BitMEX. And that is almost four times higher compared to the average funding rate of 0.01%. This suggests that the majority of the market is getting long positions.

With Ethereum’s ETH token, the funding rate is lingering at more than 0.1%. And this means that the rally is starting to get overheated. Last February, ETH’s price was rejected at $280, as its funding rate exceeded 0.2% and the overwhelming majority of the market desired the asset.

After that, $10,000 has become a key psychological level for Bitcoin since October 2019. If BTC rejects at $10,200, it would still be lower than the last peak in February 2020 at $10,473.

It would still be far-fetched to call it a lower high formation. But it possibly shows that Bitcoin’s price has not cleanly got out of the multi-month range.

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