The Bitcoin derivatives market has just reached a new record as BTC prices continue to grow, surpassing the threshold of 118,000 USD. At the same time, Bitcoin's open interest (OI) has also hit an all-time high, resulting in over 1.25 billion USD being liquidated within just 24 hours.
This increase reflects stronger participation from traders. However, it also raises questions about the ability to maintain the current trend, especially as warnings about Long liquidations grow.
Over 1.25 billion USD has been liquidated, mostly from Short positions
Data from CoinGlass shows that the total amount liquidated in the past 24 hours has exceeded 1.25 billion USD, with 1.1 billion USD coming from Short positions. Bitcoin alone recorded over 658.7 million USD in liquidations.
This shows that many traders bet on a market correction as Bitcoin surpassed the 112,000 USD mark, but that correction did not occur as they expected.
A typical example is James Wynn, a well-known trader on the Hyperliquid platform. According to reports from Lookonchain, Wynn's BTC Short position was completely liquidated in less than 12 hours, resulting in a loss of 27,921.63 USD.
According to Byzantine General, an advisor at Velo, data from exchanges suggest that this could be one of the largest Short liquidations in years.
Liquidation risk continues to rise as OI hits a new record
The market could witness more intense liquidations in the coming days. OI, an index reflecting the total value of futures contracts, reached a new high last July, indicating strong participation from traders.
Total OI across the cryptocurrency market has now surpassed 177 billion USD, the highest ever. Specifically, Bitcoin's OI has reached 78.6 billion USD, setting another record milestone. This demonstrates that traders are currently very focused on the market and are inclined to increase leverage levels in their trades.
With the current peak, the market is going through an extremely sensitive phase. When OI reaches high levels, it means that many traders are using high leverage to participate. A small price movement in Bitcoin can lead to significant losses, creating a strong liquidation effect, causing the market to be prone to instability.
This could trigger a chain of automatic liquidations, as contracts are forced to close due to inadequate margin requirements. This situation further increases tension and risk in the market, especially in the context of traders using excessive leverage in a highly volatile environment.
Trader sentiment has shifted from Short to Long
The current market sentiment is undergoing a significant shift. As Bitcoin's price continues to grow, traders seem to have abandoned Short positions and switched to Long, hoping that the upward momentum will last.
The liquidation chart from Coinglass shows a clear change in trading behavior. The amount of Long liquidations (red) on major exchanges has far surpassed Short liquidations (blue). This indicates that more and more traders are confident in Bitcoin's bullish trend and have shifted to Long instead of continuing to Short.
Famous analyst Joe Consorti has issued a warning about this change:
"Long liquidation leverage currently outweighs Short liquidation leverage at a ratio of 10:1. Be careful!"
This warning emphasizes that while Bitcoin's price increase may convince traders to change their expectations, using high leverage to enter Long positions can carry significant risks.
This shift reflects a significant optimism in the trading community, as investors are hoping for a prolonged bullish cycle for Bitcoin and altcoins. However, it is important to recognize that any unexpected news event or sudden volatility can lead to significant losses, especially in a market where traders are using high leverage.
Therefore, although the current trend may offer attractive profits, traders need to be cautious and assess risks thoroughly to avoid being caught in unforeseen volatility.