Cryptocurrency surge leads to liquidation of 87% of short positions... Warning light in the leverage market

In a market crowded with short positions, a sudden surge occurs, delivering a direct blow through large-scale liquidations (Source: Coinglass)

The cryptocurrency market succeeded in a short-term rebound, leading to large-scale liquidations centered on short positions. Especially, a strong ‘short squeeze’ phenomenon appeared across the market, causing large losses for investors crowded into high-leverage short positions.

According to market data provider Coinglass, approximately $593 million worth of positions were liquidated in the cryptocurrency futures market as of April 23, within 24 hours. About 87% of these were short positions, meaning the majority of the selling positions were forcefully cleared out in the bullish market.

The asset that suffered the largest liquidation impact was Bitcoin. It rose by 5.18% in one day, reaching $92,764, leading to the liquidation of about $280.5 million worth of short positions, nearing half of the total liquidation value. Ethereum also showed a strong upward trend, surging by 13.34% to reach $1,789. The short positions liquidated during the same period amounted to $107.04 million.

Particularly, concentrated liquidations were carried out mainly on short-term positions. Just in 12 hours, the liquidated short positions amounted to $366.95 million, suggesting that selling forces who took high-leverage positions just before this timeframe experienced losses altogether. The single largest liquidation in this round was the Ethereum-USDT position on the Binance exchange, amounting to about $4.33 million.

Experts believe that this liquidation provided an opportunity to reorganize the market by removing excessive leverage. One analyst assessed that “new support levels could be formed after continuous short liquidations, allowing for further rebounds.” However, there is a strong voice to monitor the impact of upcoming US inflation indicators and the Federal Reserve's monetary policy on the market.

The current market reflects caution against excessive leverage and seems to send a strong warning to unwarranted short positions amid a phase of technical rebound.