First of all congratulations on your wonderful victory Mr. President. Hopefully, with your grace and endeavors, you will try to MAKE AMERICA GREAT AGAIN. As we all know Donald Trump is pro-crypto, hopefully, BTC will break its highs sooner or later.
Market enthusiasts are closely monitoring the liquidation events that could hamper the trading activity on major centralized exchanges. As per the market experts, if BTC makes higher highs and reaches the threshold value, there will be $215 million in short positions forcefully liquidated. However, if it drops below the levels of $68,000 then there will be $484 million long positions liquidated.
Due to these scenarios, market volatility may increase in the crypto market. The role of exchanges will come into the picture. In the case of potential liquidations and high leverage, the traders’ positions will get automatically closed by the exchanges. This liquidation amplifies the price movements in both directions of the BTC.
What factors could trigger liquidations in the price movements?
In the crypto market, when the trader’s margin balance is not enough to cover the losses incurred by him on the leveraged positions, the exchange will automatically close his positions. This would affect the overall profitability of the trader’s revenue.
Types of Liquidations:
Short Liquidations: It generally happens when the price of BTC rises and short sellers have to buy back BTC at a higher cost resulting in buying pressure
Long Liquidations: It generally happens when the price of BTC drops, traders have to sell BTC on its rise resulting in selling pressure.
Short Liquidation Concept: Bitcoin Crossing $75,000
If the price of Bitcoin crosses its lifetime highs then $215 million worth of short positions across all the platforms could trigger forced liquidation. This scenario is called a short squeeze, which could force Bitcoin’s price to rise further as exchanges have to buy BTC to cover the short positions.
How a Short Squeeze Could Affect the Price of BTC
Escalated Buying Pressure: Exchanges try to buy BTC to liquidate short positions, this results in incrementing of upward movement of BTC.
New Buyers: Due to this, new buyers feel the FOMO (Fear of Missing Out) which attracts more BTC investors, and hence the rally begins dramatically.
The momentum of the Market: Bullish momentum breaks all-time highs which validates the bullish sentiments, attracting new retail and institutional investors. Thus, it enhances the BTC to a new price range.
Long Liquidation Concept: Bitcoin Surging Below $68,000
Long Liquidation arises when BTC dips to $68,000 which could lead to $480 million in long liquidations. This happens as traders want BTC to rise but it does not happen. In contrast, BTC slides further, and traders have to close their positions. This scenario leads to additional selling pressure, consequently, exchanges start selling BTC to cover the long positions.
Repercussions of Long Liquidations in the Price Movements of BTC
Price Deceleration: The price starts losing its momentum as forced selling starts of long positions which results in a further fall of Bitcoin.
Market Confidence: Sentiments of the market start hampering due to this scenario. Due to this, more investors start selling BTC potentially leading to a further fall of the price.
Uncertain Volatility: As a result of high-value liquidations, market volatility increases affecting both leveraged and non-leveraged investors.
Price below $68,000 for BTC would therefore act as an important level for Bitcoin, where all the long positions face increased risk of selling.
