Market Wrap: Short Seller Liquidations Help Push Bitcoin Beyond $9,500

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Bitcoin broke through $9,500 Thursday and those short sellers betting on lower prices got liquidated by some crypto derivatives exchanges. That also helped push the world’s oldest cryptocurrency higher.

As of 20:50 UTC (4:50 p.m. ET), bitcoin (BTC) was trading at $9,447, up 2.9% over the previous 24 hours. Trading seems to support a higher upward climb with a large session of buying around 12:00 UTC (8 a.m. ET) briefly pushing price to as high as $9,526 on exchanges including Coinbase. Bitcoin’s price continued its rising trend from Wednesday, well above its 10-day and 50-day moving averages, a technical analysis signal of bullish sentiment.

“A breakout above $10,055 would be a catalyst for significant upside in our work, and support is now defined by the 200-day moving average, which is now at $8,377,” said Katie Stockton, an analyst that covers global markets at Fairfield Strategies.

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Bitcoin trading on Coinbase since May 26
Source: TradingView

Stockton doesn’t see the buying momentum for bitcoin slowing down anytime soon. “We think intermediate-term trend-following indicators are pointing higher,” she told CoinDesk.

Large price movements in the bitcoin spot market can often be attributed to the crypto derivatives markets. The derivatives exchange BitMEX, for example, automatically liquidates both long and short seller positions when price begins to quickly move. Bitcoin’s upward trend is being helped in this instance by short sellers getting squeezed out, which triggers automatic buy orders that help move prices higher.

“There are definitely topside liquidations on BitMEX, and more than on average,” said Vishal Shah, an options trader and founder of derivatives exchange startup Alpha5. Over the past 24 hours, buy liquidations are at $39 million on BitMEX, and have far outpaced the $4 million in sell liquidations.

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BitMEX bitcoin liquidations the past 24 hours
Source: Skew

Since May 25, sell liquidations (shown in red in the above chart) have started to abate as buy liquidations grow (shown in blue).

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BitMEX bitcoin liquidations the past week
Source: Skew

The influence of BitMEX on the markets has been controversial as the exchange’s $700 million in liquidations during March’s precipitous price drop was considered a huge factor in downward selling pressure at the time

However, Shah says BitMEX’s influence, while still important, is not what it was prior to March. After hitting a high of $1.1 billion in open interest in February, it has not recovered since the March 12 crash and now stands around $630 million. “I do think BitMEX is turning more into a fractal of the market than the anchor. Open interest is definitely in osmosis.”

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Open bitcoin interest in USD terms on BitMEX the past six months
Source: Skew

Along with short squeezes, it’s obvious more people looking to buy bitcoin are helping the price appreciation, according to Rupert Douglas, head of institutional sales for cryptocurrency asset manager Koine. Douglas senses spot exchanges could continue to be heavy on buy orders for bitcoin. “I think the big rally is about to start. I don’t think we are going to trade below $9,000 again,” he said.

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However, not everyone is bullish as some traders are planning for downside price action in bitcoin to return at some point. A consistent price increase simply isn’t the dynamics of a market, and crypto is no different, said Josh Rager, a bitcoin trader and founder of educational platform Blackroots.

“What we’re seeing with bitcoin is a two-month run-up with a potential pullback right now, reversion to the mean and price heading back down to $7,000 to $8,000 wouldn’t be out of the question,” Rager said. “In fact, it would be healthy after running up in a two month period.”

Other markets

Digital assets on CoinDesk’s big board are all in the green Thursday. Ether (ETH), the second-largest cryptocurrency by market capitalization, gained 3.8% in 24 hours as of 20:50 UTC (4:50 p.m. ET).

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Ether trading on Coinbase since May 26
Source: TradingView

Cryptocurrency winners on the day include cardano (ADA) bouncing a healthy 14%, qtum (QTUM) climbing 2.8% and neo (NEO) in the green 2.4%. All price changes were as of 20:50 UTC (4:50 p.m. ET) Thursday.

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In the commodities sector, oil is making major gains, climbing 4.3% with a barrel of crude at $33.62 as of press time.

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Contracts-for-difference on oil since May 26
Source: TradingView

Gold traded flat on the day, with the yellow metal gaining less than a percent and closing at $1,718 at the end of New York trading.

The equities markets had a good day as the negative impact of coronavirus on the economy seems to be decreasing, at least in investors’ eyes. In the United States, the S&P 500 index ended trading flat, down less than a percent. In Europe, the FTSE Eurotop 100 index ended trading up 1.5%. Japan’s Nikkei 225 of large companies ended the day up 2.3%, with the Asian index hitting its highest close since February 27.

U.S. Treasury bonds were mixed on the day. Yields, which move in the opposite direction as price, were down most on the two-year bond, in the red 8%.

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Credit: AevanStock/Shutterstock

BitClave Search Engine Agrees to Pay Back $25M ICO in Settlement With SEC

BitClave, a California startup whose Ethereum-based search engine raised $25.5 million in a 2017 token sale, will pay back its 9,500 investors in a settlement with the U.S. Securities and Exchange Commission (SEC).

The settlement ended BitClave’s court saga almost as soon as it began. Prosecutors with the SEC announced their charges Thursday in tandem with an order that called BitClave’s Consumer Activity Token (CAT) sale an unregistered initial coin offering (ICO).

BitClave neither admitted nor denied that it broke the law when it sold CAT in 2017. In exchange, the “blockchain services firm” will return all $25.5 million to the investors and pay nearly $4 million in additional fines and fees.

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CoinDesk reported in 2017 that CAT sales were meant to boost awareness of BitClave’s data-centric search engine alternative, the BitClave Active Search Ecosystem (BASE). At the time, founder Alex Bessonov described BASE as a transparent pairing of retailers and search engines. CAT was the carrot incentivizing BASE usage, Bessonov said.

The SEC, however, called CAT something else: an investment contract.

Thursday’s SEC order said CAT tokens were investment contacts because investors had a reasonable expectation CAT would appreciate in value as BitClave matured. The order quotes BitClave’s white paper:

“As more service providers join, the amount of CATs required for an equivalent service will gradually decrease, corresponding to a CAT value increase.”

As per the settlement, BitClave will transfer 1.32 billion uncirculated CAT for “permanent disabling” and request that exchanges delist it. CoinMarketCap showed YoBit.net as the only exchange carrying CAT at press time Thursday. The data site lists CAT’s market cap at $76,753.

“Issuers of securities, traditional or digital, must comply with the registration requirements of the federal securities laws,” Kristina Littman, the SEC’s cyber enforcement chief, said in a statement. “The remedies ordered by the SEC will provide meaningful relief to investors in this unregistered offering.”

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