It looks like the Bitcoin rally is not going to end any time soon. Tesla caused a lot of buzz in the crypto world when it made news of purchasing Bitcoin. In no time, Bitcoin moved to over $46,000 within hours, liquidating up to $500 million.
On Feb 8th, the US Securities and Exchange Commission (SEC) filing announced that Tesla bought BTC worth $1.5 billion extending the bitcoin rally to over $46,000. Bitcoin price immediately moved from $39,000 to $45000 upon receiving the news.
The rally caused short positions to get liquidated that were worth $500 million.
Investors betting on the Bitcoin futures market were on the gain as the BTC price moved quickly in the short-term due to liquidity. From a crypto data firm Bybt.com, there are up to $1.34 billion worth of future positions in the futures market liquidated in a day.
This indicates that there were many short-sellers as the derivatives market was overcrowded. When people received the Tesla news, a high short squeeze led to high liquidation of hundreds of millions of dollars of positions in just a few hours.
The move is also a sign that Tesla was less anticipated to invest in Bitcoin despite Musk joining the band.
What does the future hold?
Even though many crypto investors are excited about the positive price changes and the high profits. It is also a cause of caution because of increased financing rates on exchanges.
There is a generally increased liquidity in the crypto market since there are many Bitcoin buyers. The other issue is that many are using Bitcoin as a speculative currency hence used as a long-term strategy. This can expose the market to a long squeeze that can cause a drop in the short-term.
That means that there are increased chances of a price correction happening as the market is not very confident, especially the short-term traders.
Many traders are confident that they will get good returns on their investment, but short-sellers are still not very satisfied because of the high volatility.
The move by many crypto investors to the stablecoin market also delays the Bitcoin price correction. The increasing demand for stablecoins will not in any way affects the rising Bitcoin price.