Tuesday, February 9, 2021

Tesla Pump Liquidates $500M in BTC Shorts

Few hours after Tesla’s news caused Bitcoin to gain a massive percentage to over $47,000, around $500 million worth of positions were liquidated.

Just a day after the US Securities and Exchange Commission (SEC) revealed filing that Tesla bought $1.5 billion worth of BTC, the price per coin immediately soared from $39,000 to $45,000. Then breaking into an all-time high of $47,500.

At 12:53 GMT on Tuesday, BTC was trading at $46,584 per coin.

$500 million liquidation

As the Bitcoin initially rallied to $45,000, it caused $500 million worth of short positions to get liquidated.

The term liquidation in the Bitcoin futures market refers to when the price of BTC moves quickly in a short period beyond the liquidation prices of futures contracts.

According to data provided by Bybt.com, $1.3 billion worth of futures positions were liquidated in the future market in the last 24 hours.

bybt.com data showing liquidation

It appears that the derivatives market was overcrowded with short-sellers. Tesla’s acquisition news caused a massive short squeeze, liquidating hundreds of millions of dollars worth of positions within a few hours.

What can also be inferred is that many investors were caught off-guard. They did not expect Tesla to acquire Bitcoin even after Musk changed his Twitter bio to “#Bitcoin” on January 29, 2021.

What happens after this liquidation?

The funding rates is increasing as the majority of the market continues to buy and long Bitcoin. This will make crypto traders cautious. When funding rates get overly high, the market will be vulnerable to a long squeeze that may cause a short-term drop.

Nevertheless, a cryptocurrency trader known as “Loma” says that the market is not overconfident just yet. He said:

I want us to get to that point where people start talking about how it’s impossible for us to retrace 70–90% before I think of closing my spot $BTC positions. I remember feeling like there’s no way $BTC goes back below $10k in 2018. We went to ~$3,500. Never say never.

stablecoins inflow

CryptoQuant CEO, Ki Young Ju, emphasized that there is newfound buyer demand as stablecoin inflows into exchanges were spotted. He noted:

You can call me crazy, but I think we’ll see 50k soon. Just got another stablecoins deposit signal.

If you have any questions and comments on Bitcoin today, use the form below to reply.

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source https://www.earnforex.com/commodities/tesla-pump-liquidates-500m-in-btc-shorts/