- Bitcoin breaks out and soars above $11,000 after falling earlier this week.
- Crypto markets see millions in short liquidations.
Bitcoin surged past $11,000 Friday morning after falling earlier this week. The cryptocurrency is currently trading just above the $11,000 level. Other cryptocurrencies are also green today, with Ethereum currently trading at $364 up nearly 4%.
Bitcoin’s sudden rise has resulted in a wave of short liquidations. According to cryptometer.io, BitMEX alone has seen over $10 million in crypto short liquidations in the last 24-hours.
Bitcoin short positions allow traders to bet on Bitcoin’s price falling in the future. Some traders also utilize leverage which can amplify gains but also amplify losses at the same rate.
Leverage trading allows traders to leverage greater trading power. For example, to open a 1 Bitcoin position with 10x leverage, the trader only contributes 0.10 Bitcoin to the position and borrows the rest. By doing so, the trader has the trading power of one whole Bitcoin and, therefore, amplifies potential returns on the 0.1 Bitcoin by approximately 10x.
While leverage trading can help traders amplify gains, it can also amplify losses at the same rate. For example with 10x leverage, a 10% move in an opposite direction may result in liquidations and the trader losing their entire initial contribution to the position. Therefore, traders trading with large amounts of leverage may face liquidations during price fluctuations.
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