The volume of Short positions liquidated in the cryptocurrency market surged to $322 million in 24 hours, the highest level since Black Friday, October 10th, triggering a sharp increase across most major digital assets.
This data shows a clear shift in market sentiment, as many traders betting on a price drop were unexpectedly caught off guard by the sudden market surge.
Inflows into ETFs are fueling the rise of institutional investors.
According to Coinglass data at 2:00 AM UTC on Tuesday, Short positions accounted for 77.67% of all liquidated positions, totaling $414.65 million. Approximately 109,672 traders were liquidated during this period. The largest liquidation occurred on the HTX exchange, with a BTC- USDT position worth $91.33 million being forcibly closed.
This surge appears to be driven by renewed institutional interest in Bitcoin. According to data from SoSoValue , on January 2, 2024, US spot Bitcoin ETFs recorded net inflows of $471 million. This represents a significant reversal from the net outflows of $348 million on December 31, 2023. This suggests that institutions quickly returned to the market after the New Year holiday.
Total net inflows into US Bitcoin spot ETFs have now reached $57.08 billion. Total net assets have hit $116.95 billion, equivalent to 6.53% of Bitcoin's total market Capital .
This Short squeeze highlights a stark difference between the trading positions of institutions and retail investors. While retail investors often rushed into Short positions, institutions held Longing positions, accounting for 76.52%, according to market data. This disparity suggests that large capital flows anticipated an uptrend, while smaller players remained pessimistic – a gamble that resulted in significant losses when prices reversed sharply upwards.
Major cryptocurrencies recorded strong gains.
Bitcoin surged to around $93,700, regaining momentum after a period of sideways movement at the end of December. Many altcoins saw even stronger gains. XRP led the way with a 10.8% increase, followed by Ethereum with a 0.8% increase and Solana with a 0.5% increase. Weekly gains were even more impressive: XRP rose 28.8%, Solana 11.8%, and Ethereum 9.6%.
Liquidation data over the past 12 hours shows particularly strong activity, with total liquidations reaching $345.15 million. Of this, Short positions alone accounted for $305.43 million, indicating that the majority of the Short squeeze occurred in the latter half of the last 24 hours.
Analysis of the exchange shows that many short sellers are incurring losses.
The losses were not evenly distributed across exchanges. The Cooperative was the hardest hit, recording $108.35 million in liquidations, with 96.05% being Short positions. This indicates that the majority of Cooperative users were betting on price declines. The Hyperliquid exchange – favored by professional traders – also saw a Short rate of 87.1%, showing that even experienced traders were caught off guard.
Binance – the exchange with the largest volume – recorded $95.65 million in liquidations, but the Short ratio was only 63.4%, thanks to a more diverse user base. The overall picture shows that the market has built a widespread bearish sentiment, making many traders on exchanges vulnerable to reversals when sentiment shifts.
The domino effect increases the upward price momentum.
The wave of Short position liquidation created a chain reaction across the market. As prices rose, those betting on a decline were forced to close losing positions, pushing prices even higher and triggering more liquidations. This cycle amplified the upward momentum of major cryptocurrencies.
“The frenzy of closing Short positions coupled with a surge in delta Volume has helped Bitcoin achieve its best price performance in a long time,” analyst Ardi Chia on X. He noted that nearly $1 billion in Short positions have been liquidated in the past few days. At the same time, the liquidation map still favors Short positions above the current price, while the cluster of Longing below is very small.
The Longing/ Short ratio over the past 24 hours is currently balanced at 49.99% Longing and 50.01% Short, indicating that the "tightening" frenzy has temporarily subsided. According to Ardi, the $94,500 level is a key area to watch. If the price closes and holds above this level, it could trigger further closures of Short positions above, pushing the price even higher.
