Bitcoins latest move above $10,000 looks to have nullified a significant amount of selling pressure building in the market.
The biggest cryptocurrency by market cap saw a bull breakout late on Monday, with the spot rise jumping from $9,440 to a 3.5-month high of $10,357, according to CoinDesks Bitcoin Price Index.
The price rise sparked more than $133 million worth of buy liquidations on crypto derivatives exchange BitMEX the highest since October 26, according to data analytics firm Skew.
A buy liquidation is the forced closure of a short position a bet that the price of the underlying will drop when the spot price moves above a predetermined threshold and leads to the liquidation engine to square off or close the short positions.
Positions are covered by bitcoin being purchased by the open market. A pile of buy liquidations such as the one on Monday night can, therefore, cause a surge in demand for bitcoin and a price rise. This is sometimes referred to as a short squeeze.
In total, more than $430 million worth of bitcoin shorts were closed on BitMEX, as well as other platforms including Huobi Global, Binance, OKEx, and FTX
Looking at BitMEX’s data, we can see that the majority of buy liquidations $120 million out of a total of $133 million happened in the final hour of the day, just after bitcoin moved above the $10,000 mark
BTC has spent very little time above the $10,000 level in its history. In the last year, every time we have gone above $10,000 we haven’t been able to hold the level for very long, said Asim Ahmad, co-chief investment officer at London-based Eterna Capital.The massive short squeeze indicates a lot of people didn’t expect the cryptocurrency to test and breach the $10,000 level this quickly.”
The tide may now be turning in favor of the bulls. Bitcoin closed well above the May 7 high of $10,074 on Monday, establishing a bullish higher high and confirming a triangle breakout, a bullish continuation pattern on the daily chart.
The trendline is falling from July 2019 and February 2019 as highs was breached to the higher side over the course of the weekend.
Psychologically both the $10,000 and the longer-term trendline on the daily chart that we’d failed to break several times have now become support levels, said Chris Thomas, head of digital assets at Swissquote Bank.There’s a little resistance around $10,500 then our next targets are 12,300 and 13,000.”
But Eterna Capital’s Ahmad isn’t so sure whether prices will keep their gains above $10,000, although he is bullish on the cryptocurrency over the long-term. “This the first time since the halving and we expect this to change the dynamics over the longer term but it’s hard to say if this is the moment we never see prices below $10k again,” he said.
Disclosure: The author holds no cryptocurrency at the time of writing.
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