CryptoQuant Analyst: Bitcoin Liquidates $31M in Shorts as Price Surges Past $103K

Bitcoin has just recorded its largest short liquidation event on Binance since the beginning of its April uptrend, according to CryptoQuant analyst Darkfost.

CryptoQuant analyst Darkfost has revealed that Bitcoin experienced its largest short liquidation event on Binance since the beginning of April’s uptrend.

As the flagship cryptocurrency breached the $103,000 barrier, setting a new 2024 high, a single day saw over $31 million in short positions wiped out.

Earlier this year, Bitcoin’s sharp decline from $109,000 to the $78,000 level led to a buildup of short positions, especially on Binance.

This bearish trend, combined with derivatives market activity, amplified downside volatility. However, as BTC began reversing from that lows and heading higher, those short positions began to unwind, transforming into buying pressure.

“The most significant liquidation event since the start of April occurred on May 8, with over $31 million in short positions wiped out in a single day,” said Darkfost.

This event unfolded as BTC surged past the $103,000 level, having now stalled in that zone, last trading around $103.4K.

Analyst Explains Derivatives-Driven Selling and Rebound

The analyst explains further:

Earlier this year, when BTC dropped from $109,000 to $78,000, there was a period of strong selling pressure, particularly driven by derivatives traders.

As BTC plunged, it created a snowball effect, with every downward movement leading to more selling pressure, and vice versa. This is a common occurrence, especially during periods of high volatility.

However, since early April, as BTC began reversing that move and heading higher, we’ve seen a shift in the market.

The same derivatives traders who were piling on the short positions are now exiting them, transforming into buying pressure.

This shift is crucial because it fuels Bitcoin’s recovery, setting the stage for further gains.

Moreover, we’re seeing this unfold at a time when Bitcoin’s momentum is already picking up.

This isn’t surprising given the cryptocurrency’s recent performance, not to mention the fact that it’s the world’s leading cryptocurrency.

Examining Binance Funding Rates and Overheating

Despite the cryptocurrency’s strong rally, Binance’s funding rates remain low, at around 0.004, indicating that:

Shorts are still present in the system.

Traders are cautious about going long, suggesting the rally may have further room to run before becoming overheated.

This observation is supported by CryptoQuant’s funding rate data, which shows no excessive spikes, a key signal that the derivatives market isn’t yet in an overleveraged state.

This lack of overleveraging is crucial because it lessens the risk of sudden and massive liquidations that could quickly reverse the rally’s momentum.

Chart: CryptoQuant

Examining Major Short Liquidation Events

The second chart highlights multiple major short liquidation spikes in recent weeks, including:

$24M on April 6

$19M on April 21

$31M on May 8

Each spike coincides with bullish surges, indicating that short squeezes are significantly contributing to Bitcoin’s continued strength.