Weekly Crypto Digest: $1 Billion Short Positions in Bitcoin Futures Give Upward Boost to Cryptomarket

The attached overview from Coin360 illustrates the development of the crypto market over the past 7 days. The total crypto market cap currently stands at $998 billion and now numbers more than 21,500 coins.

Bitcoin’s market dominance remains steady at 39.6%. Bitcoin’s market cap rose 8% to 396 billion over the past week. Ethereum’s (ETH) market dominance increased slightly from 17% to 19%, while the No. 2 coin’s market cap rose more than 20% to $190 billion.

$1 billion in Short positions in Bitcoin futures give upward momentum

The crypto market received a positive boost in recent days, especially Bitcoin. According to the attached picture from Coinglass, more than $1 billion in short positions in Bitcoin Futures had been liquidated in the period from Oct. 24 to Oct. 26.

hefty short positions were built after Bitcoin collapsed and hit a low of $17,600 on June 18. Traders who expected the Bitcoin price to fall even further expanded short positions in Bitcoin.

A liquidation of such short positions happens when Bitcoin rises (too) hard and market participants are unable to meet their margin obligations.
When someone is short in Bitcoin, this trader speculates on a falling Bitcoin price in the expectation and hope of closing the position at a lower price. The difference between the higher selling price and the lower buying price is then the short seller’s profit.

If, on the other hand, the price does not fall but rises sharply, such a short position becomes a loss and then the trader is left with nothing but to close the position, whether forced or not.
Positions that have to be closed because of margin calls add extra fuel to the fire, giving the price an extra boost.

Investors who had Bitcoin in their portfolios benefited from this upward movement. Bitcoin’s price convincingly passed the $20,000 hurdle and briefly touched the $21,000 mark. This hurdle was a bit too high for now after which Bitcoin consolidated between $21k and $22k.

Nevertheless, a positive shot has been given and the question is whether the positive sentiment of the past week can be continued.