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Bitcoin’s Price Swings Trigger $800 Million Liquidation Carnage

Bitcoin experienced a volatile 24-hour period that saw its price swing from a record high of $64,000 to a low of $59,000, before bouncing back above $60,000. The dramatic price movements triggered a massive wave of liquidations, totaling about $800 million in the digital asset ecosystem, according to data from Coinglass, a crypto analytics platform.

The Rise and Fall of Short Positions

The first liquidation event occurred during Bitcoin’s ascent to its new all-time high, which coincided with the listing of Coinbase, the largest US-based crypto exchange, on the Nasdaq stock market. As Bitcoin surged, many traders who had bet against the cryptocurrency, known as short positions, were forced to close their positions at a loss, as the price exceeded their expectations. This created a positive feedback loop, as the closing of short positions pushed the price even higher, triggering more liquidations. According to Coinglass, about $200 million worth of short positions were liquidated in Bitcoin in the span of a few hours.

The Reversal of Fortune for Long Positions

The second liquidation event occurred during Bitcoin’s sudden drop, which was partly attributed to a technical issue at Coinbase that prevented some users from accessing their accounts or executing trades. As Bitcoin plunged, many traders who had bet on the cryptocurrency, known as long positions, were also forced to close their positions at a loss, as the price fell below their expectations. This created a negative feedback loop, as the closing of long positions pushed the price even lower, triggering more liquidations. According to Coinglass, about $100 million worth of long positions were liquidated in Bitcoin in the span of a few minutes.

The Largest Short Liquidation Event in Three Months

The $300 million liquidation in Bitcoin, split between roughly $200 million shorts and $100 million longs, represents the largest short liquidation event in the past three months, according to Coinglass. The previous record was set on January 4, 2024, when about $190 million worth of short positions were liquidated in Bitcoin, as the cryptocurrency crossed the $30,000 mark for the first time.

BTC Total Liquidations Chart | Source: Coinglass

The Outlook for Bitcoin

Despite the rollercoaster ride, Bitcoin continues its upward trend, notching a 44% gain in February alone. If the momentum holds through the last day of the month, Bitcoin will close with six consecutive months of gains – a monthly performance not seen since December 2020, according to Coinglass. Many analysts and investors remain bullish on the cryptocurrency, citing its growing adoption by institutional and retail investors, its limited supply of 21 million coins, and its increasing recognition as a store of value and a hedge against inflation.

Bitcoin Monthly returns(%) | Source: Coinglass

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