Short Squeeze Could Liquidate $18 Billion in Bitcoin Shorts
The sharp increase in liquidity indicates that Bitcoin (BTC) may be preparing for another short squeeze.
With the price of the main cryptocurrency rising above $116,700, Bitcoin has nearly $18 billion in leveraged short positions, with a heat map showing a liquidation zone of around $120,000 (CoinGlass data).
The chart below highlights the areas with the highest density of leveraged shorts and highlights the areas most susceptible to liquidation. The green curve on the right visualizes the areas where short sellers are most at risk of being wiped out.
BTC exchange liquidation art. Source: CoinGlass
The data shows a sharp rise in the curve just above the $119,000 level, after which a dense concentration of leveraged short positions is clearly visible. This means that if Bitcoin starts to move towards this zone, we could see a chain reaction that will suck in late short sellers and potentially push the price even higher.
In other words, the chart shows how many traders are betting against Bitcoin rising above the critical level. If the asset actually rises, these short positions will incur losses and exchanges will begin to forcibly liquidate the positions.
The forced liquidation will likely trigger buy orders as traders are forced to buy Bitcoin to cover their positions. This surge in buying pressure could push the price higher again, triggering more liquidations.
7 of August Bitcoin rose 1% in a day, rebounding from a 1,35% weekly decline. The gains were largely driven by President Donald Trump’s new executive order allowing cryptocurrencies to be included in 401(k) retirement plans.
Same day in spot bitcoin ETF in USA registered an inflow of funds: BlackRock posted a net gain of $41,9 million after several days of continuous outflows.
Bitcoin inflows into IBIT as of August 7. Source: Thomas Farer
