Bitcoin and Ethereum short-squeezed on January 2 for massive liquidations

On December 26, Finbold posted a short squeeze alert for January 2024, warning for massive possible liquidations early this month. In particular, Bitcoin (BTC) and Ethereum (ETH) were the forecasted top candidates for this speculated event, now proven accurate.

The short squeeze happened as expected, driving Bitcoin’s price to new multi-year highs above $45,900 on January 2. Ethereum was traded as high as $2,446 after Finbold’s alert, for a 10% surge one day after publishing. Interestingly, it was a similar increase to BTC’s in a week — from publishing the alert to today’s highs.

In this context, the price action liquidated 62,258 traders in the last 24 hours, for a total of $205.73 million in liquidations. 

A total of $127.13 million (61.7%) came directly from short positions, causing what is known as a short squeeze. Notably, one short-seller on Binance lost $10.16 million in a single liquidation with the BTC/USDT pair, according to CoinGlass data.

Liquidation Heatmap on January 2. Source: CoinGlass

Bitcoin and Ethereum short-squeeze liquidations on January 2

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In particular, Bitcoin dominated 45% (92.63 million) of the total daily liquidations on the cryptocurrency market. Of these, $74.32 million (80%) came from Bitcoin short-sellers.

It is possible to see how BTC managed to hit the previously reported liquidity zones in the weekly time frame. 

BTC 1-week Liquidation Heatmap. Source: Finbold

On the other hand, Ethereum had a balanced liquidation weight among short and long positions. Its $32.28 million total liquidations originated from approximately 46% shorts and 54% longs.

These short-squeeze events highlight the risks of speculating in such a volatile market. Essentially, while retail traders build their positions, professional market makers are hunting the liquidity these operations leave behind. Traders must learn how to hedge their positions through proper risk management strategies.

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.

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