Bitcoin rebound triggers $100 million in short liquidations

Bitcoin’s price soared past the $42,000 mark on Friday, reaching heights not seen in over a week. This surge resulted in the liquidation of almost $96 million worth of cryptocurrency short positions, as per data from Coinglass.

Grayscale Bitcoin Trust (GBTC)

Within 24 hours, liquidated bitcoin leveraged positions spiked to over $41 million, with shorts accounting for more than $37 million of this amount. The largest cryptocurrency by market capitalization witnessed a 5% increase in the past day.

This uptick in Bitcoin’s price coincided with the expiration of a significant number of bitcoin options on Friday. Prior to the expiry, there were 94,000 bitcoin options set to expire, featuring a put-call ratio of 0.51. This ratio is often seen as a bullish sign for the asset.

Following Friday’s expiry, the open interest in bitcoin options has seen a notable decline, easing the derivatives market’s pressure on the digital currency.

Earlier in the week, BitMEX Co-Founder Arthur Hayes had a different outlook, predicting a continuous decline in bitcoin’s price. Hayes forecasted a 30% correction from the post-ETF approval high of $48,000, suggesting a support zone between $30,000 and $35,000 for bitcoin.

Despite these predictions, bitcoin rebounded this morning. Grayscale’s GBTC, which is in the process of converting to a spot ETF, witnessed slowing outflows for the third consecutive day. The outflows on Jan. 25 were $394.1 million, showing a decrease from the previous days, yet still significant. A significant portion of this exodus is attributed to FTX’s bankruptcy estate, which reportedly dumped 22 million GBTC shares, amounting to close to $1 billion.

The Grayscale Bitcoin Trust, which had operated as a closed-end fund for a decade, accumulated nearly $30 billion in assets before the U.S. Securities and Exchange Commission (SEC) approved its conversion into an ETF, along with the approval of 10 newly created bitcoin ETFs.

In contrast, the newly launched spot bitcoin ETFs, including those from BlackRock, Fidelity, and others, have not experienced any daily outflows yet. IBIT recorded the highest inflows on Thursday with $170.7 million, followed by FBTC and BITB. However, these inflows were not sufficient to offset the GBTC outflows, resulting in a net outflow of nearly $80 million.