Amidst a scenario of uncertainty in the cryptocurrency market, due to geopolitical conflicts, bitcoin soared 15% on Monday (28), reaching 44 thousand dollars. With the recent rise, bitcoin left several investors who were betting on the fall (shorts) in the loss. A total of 68,736 traders were liquidated, the majority being short or betting on the digital currency’s fall. A contrary movement took place in January, leaving several investors who were betting on the high (long) settled. This move is quite common, as it “cleans up” the market. In this way, when the amount of leveraged investors is very high, it becomes an “exaggeration” in the market and tends to reverse. According to data from Coinglass, on Monday (28) the amount of leveraged investors — 100% in short — reached a volume of US$ 300 million liquidated in the last 12 hours.
Settlements on leverage exchanges -Monday (28). Source: coinglass As per data from on-chain analytics platform CryptoQuant, $230 million in short positions have been liquidated in the cryptocurrency perpetual futures market since Bitcoin passed the $43,800 mark. Although bitcoin is now trading for around $43,500, the volume of leveraged bitcoin positions stands at $131 million.
$BTC market price($43.8K) spiked by +17.4% in the past 4 days
– $229.2M short positions were liquidated in the perpetual markets in the past 4 days
– Aggregated funding rate is currently negative Set Funding Rate Alert👇https://t.co/Ceg4lh6mqL pic.twitter.com/WUnlU3PJW4
— CryptoQuant.com (@cryptoquant_com) February 8, 2022
The data shows that aggregate funding rates are negative, meaning that despite current sell-offs, most traders are still betting on the digital currency’s decline.
Amount settled on exchanges in dollars. Source: coinglass Funding rates typically indicate the sentiment of traders in the perpetual swaps market. Negative rates indicate that traders betting on the downside are dominant and willing to pay off traders betting on the upside.
Leveraged get paid off by betting on the fall
The chart below shows the numbers of leveraged exchanges, note that on Tuesday (1), a “contrary” movement begins to happen, where the “long” leverages begin to be liquidated as well.
Settlements on leverage exchanges Tuesday (1). Source: coinglass This category of techniques employed in the market for quick wins is no different from betting on casino games. Despite this, many investors bet their equity hoping to obtain greater returns, without managing the risks. In a very volatile market such as cryptocurrencies, greater care and risk management are required. Therefore, investors should be cautious when betting their equity.
With bitcoin’s recent rally, one of the most popular Fear & Greed Index — which measures market sentiment — has entered a “neutral” zone, after spending several weeks in the extreme fear zone.
Fear & Greed Index, an index that shows the current sentiment of the cryptocurrency market. It is worth remembering that bitcoin has remained below 45 thousand dollars since the beginning of this year, this provoked feelings of pessimism among investors. Despite narratives of a possible bear market, some experts indicate that bitcoin remains in a bullish cycle. However, the year 2021 brought many changes with it, such as the entry of institutional and even governments adopting bitcoin as a legal tender. These events can still have effects for this year.