With the Fed raising interest rates by 75 basis points, as expected cryptocurrency markets have bounced in the last 24 hours.
After the Fed statement bitcoin increases by 10% at a time, Ethereum rose as much as 16%.
The cryptocurrency’s overall market cap rose 6.4% to register one of the biggest gains in recent weeks, as risk appetite has returned among investors and lower interest rates are priced in.
Over $200 Million Short Position Liquidated
The upward move resulted in liquidation of over $200 million on shorts and over $175 million on long trades.
More than 72% of all traders liquidated were short positions, meaning a “short squeeze” may have contributed to some of the price spikes in major cryptos over the past 24 hours.
A short squeeze refers to a sharp rise in the price of an asset that forces previously shorted traders to close their positions, often leading to a rise in prices.
Cryptocurrency exchange OKX recorded the highest number among its peers, seeing over $128 million in liquidation, with more than 88% of traders invested in falling prices on this exchange.
Short positions represent bets that the market will fall, while long positions represent bets that prices will rise.
Liquidation means that an exchange forcibly closes an investor’s leveraged position due to the partial or total loss of the investor’s initial margin.
This happens when a trader is unable to meet the margin requirements for a leveraged position (not having enough funds to keep the trade open).
Ethereum futures saw liquidation of over $165 million across shorts and longs. Data from Coinalyze shows that trading volumes on ETH have increased over the past weeks, surpassing the leading Bitcoin volumes in futures markets volumes.
*Not investment advice.