A strong start to the crypto trading year has left a hole in the pocket of the pessimists.
According to CoinJournal.net, half a billion dollars worth of cryptocurrency short positions were liquidated in early 2023 due to the strong crypto rally.
Half a billion dollars of short positions were liquidated over the weekend, the most in three months.
Crypto short sellers borrow cryptocurrency or tokens from a lender, sell it on the open market, and then attempt to buy it back at a lower price in the future to repay the lender and make a profit. They use short trading as a high risk, high reward strategy to make significant profits, but only if the market continues to decline.
Recently, the market has seen a rally, with Bitcoin (BTC) above $21,000, Ethereum (ETH) above $1,500, and altcoins such as SOL, ADA, and BNB are also seeing gains.
However, some markets have recovered or declined since the initial pump, leading investors to worry whether this recent rally will continue or turn out to be an extraordinary blip.
“The past few months have undoubtedly brought indicators of a more positive environment with respect to inflation, as well as a re-boost to the Chinese economy,” said Max Coupland, director of CoinJournal.
“However, I worry whether investors are jumping the gun on the assumption that this means the Fed will now pivot sooner than expected. (Fed Chair) Jerome Powell has been adamant that as long as inflation is firmly under control, Rates won’t drop until that happens, and we’re still far from the 2% target, while uncertainties like the Russian war in Ukraine are still highly unpredictable.
The Little Short?
The movie “The Big Short” introduced “shorting” to many people’s lexicon in 2015. Based on the true story of several individuals, the film depicts how he predicted the 2007–2008 housing market crash, bet against it, and made huge profits. The rest of the country and the world suffered the consequences of the financial crisis.
In the movie “The Big Short,” Michael Berry, played by Steve Carrell, successfully bet that the subprime mortgage market would collapse due to variable interest rates. The bet resulted in a profit of over $700 million for Barry.
Crypto shorts are rarely on the scale of a movie, and investing should always be done with caution.
disclaimer
BeInCrypto has reached out to the company or individual involved in the story for an official statement regarding the recent developments, but has not yet received a response.