The entire crypto community had its eyes set on a potential short squeeze in January 2024, following the revelation of potential approval dates for ETFs. Bitcoin (BTC) and Ethereum (ETH) were prime candidates for this event, and the speculations that had been made earlier proved to be accurate.
As anticipated, the short squeeze occurred on the second day of the month, with Bitcoin’s price surging to $45,950, a level not seen in over a year. Ethereum, too, experienced a significant 10% price increase the day after the warnings, reaching $2,446.
These price movements had substantial financial implications for investors, resulting in the liquidation of 62,258 traders in the last 24 hours, amounting to a massive $205.73 million in liquidations.
Of the total liquidations, $127.13 million (61.7%) came directly from the liquidation of short positions, epitomizing the short squeeze. Notably, on Binance, a single liquidation event in the BTC/USDT pair caused a trader to incur a staggering loss of $10.16 million.
Focusing on Bitcoin, it was responsible for 45% ($92.63 million) of the total daily liquidations in the crypto market, with $74.32 million (80%) of that stemming from Bitcoin short sellers. A weekly analysis showed BTC reaching previously reported liquidity zones.
On the other hand, Ethereum reflected a balanced liquidity distribution between short and long positions. Of the total $32.28 million liquidations, approximately 46% were shorts and 54% longs. Such short selling events can lead to increased speculation in highly volatile markets. It’s important to note that while individual investors take positions, they are often followed by professional market makers who subsequently hunt for the remaining liquidity.
