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Liquidation

Bulls LiquidatedThere is one thing that beginner traders rarely understand about bull markets. Traders can lose money in a bull market as much as in a bear market. This week reminded us about the brutal volatility that makes crypto both loved and feared. The market briefly went into a tailspin after a rejection just above the $69,000 previous all-time high. The Bitcoin price then found its feet again and marched back up. But not without liquidating many a trader with an aggressive leverage long position in place. Bull markets in crypto are prone to rapid and steep drops, which they usually recover quickly from. Areas of heavy selling trigger these drops, which causes other traders to sell even more, resulting in a cascading effect. One of these areas was the previous Bitcoin All-Time-High price. Spot trading would not be affected, but slight drops in price breaks highly leveraged bets because there isn't enough collateral to cover their declining positions. This leads to more sales and forced closings. We saw the first major instance of a "liquidation cascade" on Tuesday in this bull market. The event removed over $3 billion of open interest in Bitcoin, making it the largest liquidation event in the last six months. The funding rate requires 'cleansing' to maintain longer-term price movements. Funding rates are used in futures markets where leverage can encourage either long or short positions. The futures price of the asset will match the index spot price. Before the reset, Funding for all assets sat at around 100% APR. After the initial drop, the rate dropped to 20% APR within a few hours. Shorting becomes less attractive and profitable when funding is lower. But higher funding rates are likely to continue. BTC and other currencies will be longed once again by traders as they strive for new highs. That is the formula of a bull market. In previous cycles, price corrections were accompanied by a certain amount of confidence gain due to the need for resetting funding rates. This cycle, however, the seemingly endless spot demand from ETFs provided an additional layer of comfort. Blackrock's IBIT experienced $788 million of inflows on Tuesday this week - a new record. The ETFs' combined net inflows totalled $648 million - their third highest. The trading volume of ETFs has also surpassed $10 billion, with traders taking advantage of the volatility. Unsurprisingly, traders quickly bought up the price dip. We remain firmly in Bull Market territory. But keep in mind, if you overleverage your position, you could live to regret it.
Long
by Coinrule
1
Coinbase Denies Retail Buy-In at 59-60k!Traders, I've been seeing a ton of traders who wanted to buy BTC at 59-60k but their transaction "failed". There is a reason why I am now calling BTC, Blackrock Trading Coin and why I have been extra cynical and skeptical about Blackrock's crypto trading exchange, Coinbase, as well as their entry into the crypto space via ETF. But I won't get into conjecture or conspiracy here. Just watch. You'll witness more shenanigans just like this the higher price goes. Anyways, we can use Coinbase's buying rejection at 59-60k as further proof that this was the bottom of our liquidation flush. Notice how on my chart the wick down touched exactly that top ascending purple trend line. Once hit, we quickly bounced back above my multi-year ascending support/resistance (now support) trend line from 2019. As long as we stay above this line, I am completely comfortable and confident that our upward journey will continue. Remember, there is no escaping the math here. ETFs are simply demanding far more than miners can produce. Only 24% of BTC remains liquid. And there is burgeoning institutional demand for BTC ETFs in a growing number of countries. All this before halving. There is no way to get around these fundamental facts. Fundamentals supersede technical analysis in this case. And this is coming from someone who touts technical analysis most of the time. Fundamentals are priority but we can see that technicals are supporting fundamentals. Look also at that RSI. Finally, it gets a break and is able to drop back below overbought territory. Altcoin RSI readings look even better. I suspect when all the dust settles and price closes out this candle we may even be back above that 64.8k support. But if we're not and we settle anywhere above my multi-year line of support, I remain bullishly biased and expect us to hit our inverse H&S target of 79k soon. Best, Stewdamus
INDEX:BTCUSDLong
by stewdamus
BTC - Analyzing Order Blocks to Predict Liquidations / Stop HuntHello all, I’d like to provide a visual representation of a method we can use to understand and predict stop hunts / liquidation moves on bitcoin - these mysterious and hard to capture phenomenon we all experience at seemingly random times. Here I show blocks of orders - which I separate if we have a candle retracement overlapping the block. We can see this mass chain of red order blocks on my chart. What these are - are long position stop losses. To understand the significance of these orders let’s break down the mechanics of these orders. Long stop losses are: 1) Limit sell orders 2) Orders that don’t automatically fill if price is above the sell price (unlike limit sells) 3) Leveraged orders - using traders liquidity with a leveraged multiplier to increase position size When dealing with “leveraged” order sizes - we can also leverage / multiply the speed, power, and velocity of chart movement as these orders are filled. If we can assume an average leverage usage of 20x - We can speculate a price movement of 20x speed, power, and velocity. With this information - we can look at bitcoin on the large time frames - in this case the multi-day. Identifying chart patterns, we can estimate the timing of movements by dividing the suspected speed of these moves by approximately 20. This allows us to speculate these very fast moves on bitcoin, which are essentially as simple as this description: What are stop hunts and liquidations? 1) The result of retail traders stop loss orders being triggered and creating automatic chain reactions of order fulfillment 2) Order blocks being filled and triggered at multiplied speed and power 3) Not forced manipulation - but a natural occurrence of the consequence of a futures dominated market and large order gaps left intact on the chart Looking back at bitcoin we can see this phenomenon happen time and time again. 1) Consolidation / long steady movements accumulating stop loss orders 2) A fast and large candle in the opposite direction as these stop loss orders are triggered and executed Additionally we can understand the benefits of these pheonomons to the exchanges and market makers. Liquidations return your entire trading position to these for profit companies - so there is a clearly defined benefit to executing these moves to the platforms we trade on. Further more - creating automatic movements that generate high speed and velocity triggers an error known as slippage - price moves so fast that it doesn’t allow adequate time for the stop loss order to execute before the liquidation of a leveraged trade is triggered first - resulting in liquidation with a stop loss in place. HOPE THATS HELPFUL AND GOD BLESS
Short
by DickDandy