Half a billion dollars of Ethereum shorts liquidated as market rips upward

By:
on Oct 27, 2022
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  • Liquidations of Ethereum short-traders topped half a billion across Wednesday and Thursday
  • Across all coins, $1.3 billion of short liquidations were triggered
  • Stock market moving sharply upward off softer interest rate expectations triggered the outsized crypto move

For crypto short sellers, it has been a good year.

This week, however, the tables flipped. Ethereum spiked violently upwards from $1350 to above $1550, and short sellers were caught off guard.

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Over $300 million in short bets were liquidated on Wednesday, with another $255 million in wipeouts Thursday putting the total above half a billion for the two days. The below chart from CoinGlass shows quite how out of the blue this move came, with Ethereum news rather muted over the last month or so since the Merge.

What are short liquidations?

A short trade is a bet on an asset falling in value. These numbers here are from the futures market, which is often leveraged and can show outsized reactions to market moves in the underlying asset. A liquidation occurs when the price moves against a trader to such an extent that the collateral posted is entirely wiped out, the trade closed out automatically, and the return comes in at the full -100%.

Short sellers were betting against ETH in the hope that the price would lag, however softer data coming in across the economy pushed the stock market upwards as investors bet that the Federal Reserve would not be as aggressive with interest rates as previously anticipated. With the economy hurting and showing recessionary signs, the thought process is that the Fed will be more hesitant to proceed with this ultra-aggressive monetary policy.

And where the stock market goes, crypto follows. It thus wasn’t long before ETH and the rest of the market exploded, with ETH jumping above $1,500 for the first time since mid-September.

What about the rest of the market?

Crypto being so correlated, the rest of the market so saw similar gains. While ETH claimed the most liquidations, the total in short liquidations was $1.3 billion across the two days.

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FTX – as always – led the way, with over $1 billion of the liquidations occurring there alone. Their dominance in the futures space (their name, after all, is derived from “futures exchange”) remains strong.

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