Based on the ongoing conditions, it is easy to assume that Bitcoin (BTC) currently faces a minor risk of suffering liquidations-induced price volatility. Over the previous few months, Bitcoin (BTC) has soared in value which enabled the cryptocurrency to hit the nine-month high of $29K. Despite the sharp rally breathing life into the crypto market once again, the use of leverage remained muted.
Liquidation can be defined as the forced closing of long bullish and short bearish positions in the market with perpetual characteristics. In addition, through leverage, traders can operate with huge sums of money, which can generate even larger effects on the market.
When the degree of leverage in the cryptocurrency market is high, liquidations of short positions can intensify upward movements, leading to what is known as a short squeeze. Similarly, liquidations of long positions can exacerbate bearish movements, leading to a long squeeze.
Analysts of Blockware Solutions explained that:
“High open interest relative to market cap means the market could be vulnerable to a short-squeeze or liquidation cascade, which would result in a price swing being more volatile than it otherwise would have been due to forced buying or selling, respectively,”
But,
“The medium-term trend of decreasing open interest/market cap has not been broken, which is reassurance that, even in the event of downward volatility, price is most likely not going to decrease to the level it was at to begin the year”
50% of Bitcoin (BTC) Hasn’t Moved in Years
In other news, approximately 50% of Bitcoin (BTC) tokens have not been touched in two years, and this suggests that investors who bought the token at all-time high prices might be waiting to sell when it is the right time. Back in April 2021, Bitcoin (BTC) traded at an all-time high price of a whopping $69K.
An additional 29% of the token’s entire supply is dormant for the previous 5-10 years. The total sum of these tokens accounts for approximately 5.6 million Bitcoin (BTC) tokens, which are worth more than a staggering $158 billion.
Similarly, Bitcoin has topped the list of countless search engines throughout the USA, which suggests that many Americans have been curious about the news surrounding the token. The term crossed other additional trending words that include Donald Trump and Elvis Presley.
Bitcoin (BTC) has displayed gains of almost 1.40% in the previous 24 hours, taking the trading price up to approximately $28,318. At the same time, the total market of the largest cryptocurrency is $547 billion.
