Today, Bitcoin (BTC) took a big step above $50,000. This was quite unexpected as the cryptocurrency started to fall yesterday following negative inflation news. The rise above $50,000 caused significant damage to traders who expected crypto prices to move in the opposite direction.
Nearly $150 million disappears in crypto shorts
As a trader, if you expect a drop in the Bitcoin price, you can do so short go. When you short sell, you can earn a return if the price falls, but you run the risk of being liquidated. This means that your position will be forcibly closed.
Unexpected price movements often cause significant damage to these traders. This was also the case with today’s jump above $50,000. According to data from analytics platform Coinglass, more than $148 million was lost on crypto shorts in the last 24 hours.
It was primarily the Bitcoin shorts that suffered. Bitcoin short positions worth $91 million have been liquidated. For Ethereum (ETH), the damage amounts to $34.8 million.
Short selling is a bit more complicated than simply buying Bitcoin. First, a trader first borrows a quantity of Bitcoin from an exchange or other platform. The dealer then sells these borrowed Bitcoins directly on the open market at the current market price.
Then he has to wait for the Bitcoin price to fall. If the price falls as expected, the trader buys the Bitcoin back at the lower price. The trader returns the redeemed Bitcoin to the exchange or platform from which he borrowed it. The difference between the price at which he sold it and the lower price at which he bought it back, less any fees or interest, is profit.
Bitcoin exchange funds provide positive momentum
Bitcoin has certainly caused a surprise in the last few days, partly due to inflows into the American Bitcoin exchange funds. The funds are still attracting a lot of capital, creating positive sentiment among Bitcoin investors. As a result, these funds purchase massive amounts of Bitcoin.
Boomers are selling gold ETFs and buying Bitcoin ETFs. pic.twitter.com/WHPWxLJpOX
— Asher Hopp (@AsherHopp) February 14, 2024
According to the latest data, all American Bitcoin exchange funds purchased a total of 12,192 Bitcoin yesterday. In total, the 9 funds own more than 700,000 Bitcoin.