has left traders who bet against crypto prices licking their wounds, but there remains a significant number of bearish traders out there.
Bitcoin prices have surged nearly 20% in just a few days, from as low as $17,500 a week ago to as high as $21,000. At $20,800 on Monday, the largest cryptocurrency hit its highest level since the collapse of crypto exchange FTX in November, hitting markets and at one point pushing bitcoin to a two-year low of $15,500.
“Increased risk appetite has fueled a surge in bitcoin, which spent the last weeks of last year between $16,000 and $17,000. It’s up more than 25% year-to-date, rising above $20,000,” said Craig Erlam, analyst at brokerage Oanda.
“Whether it’s a sign of a dip and resurgence or just a brief pullback is unclear, but there are clearly still a lot of bullish traders out there. It should be an interesting few weeks.”
The violent move further hurt traders who were betting against bitcoin with so-called short positions. These trades take place in the Bitcoin perpetual futures market, the most liquid of all cryptos. Traders often take short positions on margin or with borrowed money and can be forcibly closed out of their position by brokers if the market turns against them in a process called liquidation.
Since Jan. 11, when bitcoin traded below $17,500, more than $355 million in bitcoin short positions have been liquidated, according to crypto data firm Coinglass. Across the entire crypto landscape, $1.1 billion worth of shorts were destroyed during the same period, according to Coinglass.
And yet, there are still more people shorting Bitcoin than making bullish bets that prices will continue to rise.
In the five days from Jan. 11 to Jan. 15, when bitcoin rallied 20%, there were more “long” bitcoin bets than “short,” according to data from Coinglass, supporting a large bullish trend. However, by Monday, that trend had reversed as more than 50% of Bitcoin perpetual futures positions were short on Bitcoin.
It could be a sign that more pain is in store for the bears if Bitcoin continues to move higher. Or it could be an indication that the market believes there is enough momentum for now and that prices may moderate the upside a bit.
Email Jack Denton at [email protected]