- Bitcoin continues to rise liquidating millions in Bitcoin short positions.
- The cryptocurrency is currently trading at $9,400.
After falling below $9,000 last week, Bitcoin bulls are managing to push the cryptocurrency’s price back up. Wednesday morning’s rise to $9,400 also resulted in a wave of short liquidations. According to cryptometer.io, over $9 million in Bitcoin shorts were liquidated in the last 24-hours on BitMEX alone.
Opening Bitcoin shorts allows traders to make a profit if Bitcoin falls. To short Bitcoin, traders sell Bitcoin at market price and then later buy back the same quantity of Bitcoin at a lower price and net the difference.
Some traders also open Bitcoin shorts through leverage trading. Leverage trading, also known as margin trading, allows traders to borrow a significant portion of the position. For example, a trader opening a one Bitcoin short with 10x leverage will borrow 0.9 Bitcoin and only initially contribute 0.1 Bitcoin. Then the trader will sell the Bitcoin at market value and wait for the price to drop. If Bitcoin’s price does fall, the trader can repurchase the Bitcoin at the lower price, pay back the borrowed Bitcoin and then net the profit. Through leverage trading, the traders are able to trade with larger trading power.
However, leverage trading comes with its own risks. For example, with a 20x leverage, if Bitcoin moves 5% in the opposite direction, the trader’s position will be liquidated and result in them losing their entire contribution. Therefore, even relatively minor price fluctuations often result in millions in liquidations.
Bitcoin Outperforms Gold
While sharing some similarities, including a limited supply and scarcity, Bitcoin has been outperforming gold year-to-date (YTD), as previously reported by The Crypto Associate.
Despite boasting strong returns and beating gold thus far, both assets have remained relatively strong amid the economic uncertainty during the pandemic.
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