- Last week, a surge in Bitcoin Cash (BCH) prices to $320 caused futures traders to experience their largest losses in over two years, amounting to over $25 million.
- The spike was likely fueled by a boom in BCH trading volumes in South Korea and the launch of EDX Markets, a new exchange that supports BCH.
Last week witnessed an unexpected turn of events for Bitcoin Cash (BCH) futures traders who recorded the highest losses in more than two years. As per data from Coinalyze, these losses totaled over $25 million. This massive drop occurred concurrently with a significant price leap for BCH, which shot up to the $320 mark.
Trading Tactics and Trends
Traders who took short and long positions on BCH futures were both significantly affected. The term ‘shorts’ refers to wagers against an asset’s value, while ‘longs’ are bets predicting a price increase. Interestingly, this combined loss may have played a part in triggering the sudden price spike.
As of Monday, BCH futures have shown negative funding rates across all exchanges where they are listed. This is indicative of the dominance of short traders, who are currently paying long traders to maintain their positions. In fact, BCH traders are reportedly paying exchange fees at rates of up to -0.05% every eight hours, hinting at a surge in short interest in the tokens.
In trading parlance, ‘liquidation’ refers to the forceful closure of a trader’s leveraged position by an exchange, due to a partial or complete loss of the trader’s initial margin. This happens when a trader can’t meet the margin requirements for a leveraged position, i.e., they lack the necessary funds to keep the trade open. Notably, major liquidations can often signify the peak or trough of a sharp price shift, allowing traders to adjust their positions accordingly.
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What Fueled the Spike?
The significant shifts in the BCH market last week are likely to have been spurred by two key factors. First, the South Korean exchanges witnessed a surge in BCH trading volumes. South Korean traders are infamously known for their ‘irrational exuberance’ in trading behavior.
Second, the launch of EDX Markets, a new exchange platform supported by traditional finance titans like Fidelity Digital Assets, Charles Schwab, and Citadel Securities, might have contributed to the BCH price hike. This platform offers support not only for BCH but also for other cryptocurrencies like Bitcoin (BTC), Ether (ETH), and Litecoin (LTC).
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