- Over $16 million in Bitcoin shorts have been liquidated in the last 24-hours on BitMEX alone.
- Bitcoin is climbing back towards $12,000 after briefly breaching it last week.
Following last week’s plunge back below $11,000, Bitcoin continues to rebound, up over 4% Wednesday morning. Bitcoin rising has liquidated over $16 million in Bitcoin short positions in the last 24-hours on BitMEX alone, according to Cryptometer.io.
Bitcoin shorts allow traders to bet on Bitcoin’s price falling in the future. To short Bitcoin, a trader will sell Bitcoin at the current market price. Then, assuming the spot price falls, the trader will then repurchase the same amount of Bitcoin for a lower price and net the difference. Some traders also utilize leverage trading which can give traders greater trading power and amplify returns.
Leverage trading allows traders to trade with a far larger Bitcoin position. For example, to open a one Bitcoin position with 25x leverage, the trader only contributes 0.04 Bitcoin to the position and borrows the rest. Through this, traders can make trades with one whole Bitcoin and therefore amplify returns on the 0.04 Bitcoin by approximately 25x.
However, leverage trading also amplifies losses at the same rate it amplifies gains. For example, with 25x leverage, a 4% move in the opposite direction may result in Bitcoin shorts being liquidated and the trader losing their entire initial contribution of 0.04 Bitcoin. Therefore, positions with large amounts of leverage may face liquidations during relatively minor price fluctuations.
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