On-Chain Analysis: BTC Drop Liquidates 5M in Long Positions

On-Chain Analysis: BTC Drop Liquidates $165M in Long Positions

In today's on-chain analysis, BeInCrypto examines the indicator for long and short liquidations in Bitcoin futures . Faced with the big swings in BTC price over the past few days, both bulls and bulls have lost funds.
In today's on-chain analysis, BeInCrypto examines the indicator for long and short liquidations in Bitcoin futures . Faced with the big swings in BTC price over the past few days, both bulls and bulls have lost funds.

First, a bullish engulfing candle on May 4 triggered a liquidation of $45.5 million in short positions. But the next day, an even larger bearish engulfing candle liquidated long positions up to $165 million. Looking at price movement throughout 2022, Bitcoin is in a clear sideways trend.

BTC Price Movement Analysis

Since the beginning of 2022, Bitcoin has been trending sideways, which some analysts are calling the crab market. BTC reached a low of $32,933 on January 24 and a high of $48,280 on March 28. Therefore, the trading range is around $15,000, which is 46.5% measured from low to high.

Since the one-year peak, there has been a multi-week drop that has brought the price of BTC to its current level near $36,000, or -25.5%. It is worth mentioning that Bitcoin did not close a daily candle below the important support level at $35,000 in 2022.

The last 3 days have been filled with violent moves for BTC both up and down. On May 4, Bitcoin generated a bullish engulfing candle with magnitude greater than 5% (green arrow). Although such a candlestick is usually a signal of a continuation of an upward movement, a sharp decline occurred a day later.

On May 5, Bitcoin formed a large bearish engulfing candle at 7.9% (red arrow). The drop not only completely negated the previous day’s gains, but also caused the loss of a bullish (yellow) support line. It was in effect from the annual low of January 24.

long settlements

In an environment characterized by such a volatile Bitcoin market, we have recently seen large futures contract liquidations. However, due to the broader downward move, traders in long positions took the most losses.

According to data from CoinGlass, the total liquidation of long positions on May 5 was almost $165 million. This is the highest value since January 21, when BTC generated more than 10% bearish candles with the highest trading volume this year.

Also high, although slightly lower than the previous one, the readings are provided by a chart from Glassnode. According to this on-chain data provider, total long liquidations for Bitcoin futures contracts were nearly $127 million on the day of the decline. The difference in these values ​​is likely due to the different range of trades being taken into account by the two analysts.

short liquidations

Despite the record liquidation of long positions, even low level traders have not avoided substantial losses recently. The reason, of course, was the bullish engulfing candle on May 4.

According to data from CoinGlass, short liquidations were recorded at the $45.5 million level that day. On the other hand, according to Glassnode, short liquidations amounted to $25 million. It is worth mentioning that traders who bet on the downside suffered the biggest losses on April 25, when BTC crossed $40,000.

crab market

There is another interesting indicator that shows how well the current situation resembles a sideways crab market. It is the so-called domain of futures long settlements.

This indicator measures the percentage of long liquidations, that is, long liquidations / (long liquidations + short liquidations). A level of 50% means that the same number of long and short liquidations have taken place. Values ​​greater than 50% mean more long positions have been liquidated and values ​​less than 50% mean more short positions have been liquidated.

Looking at the chart of this indicator over the last month, we can see that it behaves almost like a perfect oscillator. This means that both sides, bullish and bearish, systematically lose. This is a typical sign of a sideways trend.

Interesting survey conducted on Twitter by the well-known on-chain analyst @TXMCtrades , who works with Glassnode on a daily basis. On May 5, he asked his followers a question about sentiment over the next 12 months regarding risky assets.

A slight majority indicated a crab market (38.3%), ahead of a bull market (37.1%) and a bear market (24.6%). The survey was statistically valid with 1,915 respondents.

Samuel Edwards
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