Bitcoin surges past $117K as short liquidation ignites bull rally

Bitcoin surged past $117,000 this week in a dramatic market swing, driven by a massive short liquidation that shook traders worldwide. Following hints of potential Fed interest rate cuts from Jerome Powell, the crypto market capitalization jumped over 4%, briefly reclaiming the $4 trillion mark, while trading volume spiked 79% to $261 billion in just 24 hours.

The Fear and Greed Index remains neutral, though it is tilting towards ‘greed’. Analysts tie this sudden shift to a massive short liquidation, marking one of the largest this year.

$476M Wiped Out in Massive Short Liquidation

According to CoinGlass, over $476 million in short positions were liquidated within 24 hours, reflecting a wave of massive short liquidation in the market. The largest single order was a $10 million ETH-USDT SWAP on OKX. Powell’s remarks revived optimism, triggering sharp rallies in major tokens.

“These types of massive short liquidations illustrate how quickly sentiment can change in leveraged markets,” said Michael Rinko, analyst at Delphi Digital.

Ethereum long and short liquidation, Source: CoinGlass

Ethereum Hits New Record High

Ethereum outperformed the broader market, climbing nearly 15% to just under $4,900 and surpassing its 2021 peak. “ETH has recorded a 42% increase since the beginning of the year, while Bitcoin has increased by 24% in the same period,” analysts noted.

At press time, Ethereum was trading at $4,714, with its 24-hour trading volume up 129% to $80.25 billion. Analysts point out that the rally was largely fueled by short liquidations, forcing bearish traders to exit their positions.

“This is a textbook example of how massive short liquidations can shift market momentum,” said Adul Patel, CEO of Mudrex.

Powell’s Jackson Hole Remarks Trigger Market-Wide Liquidation

During his Jackson Hole speech, Powell highlighted employment concerns and hinted that an interest rate cut could be possible as early as September. His comments sparked massive buying in Bitcoin, Ethereum, and other altcoins, while data shows that nearly $770 million in leveraged positions were liquidated, causing significant losses for bearish traders.

According to CoinGlass, Ethereum alone accounted for $384 million in liquidations, 71% of which were short positions. Analysts say this indicates that many traders underestimated ETH’s fundamental strength and market demand.

Ethereum ETFs Attract Inflows as Bitcoin Funds Bleed

Fund flows showed a stark contrast between top assets. Bitcoin ETFs recorded a $23.15 million outflow on Friday, marking six consecutive days in the red, with BlackRock’s IBIT losing $200 million.

In contrast, Ethereum ETFs attracted $337.63 million in inflows, reflecting growing institutional interest. Ethereum transactions rose 63% last month, and wallets holding over 10,000 ETH increased by 200 since July. Experts believe ETH’s strong fundamentals could reduce the likelihood of large-scale short liquidations in the future, as investors increasingly favor long positions.

What Traders Should Watch Next

For traders, Powell’s dovish signal could provide support for risk assets through the end of the year. However, the recent large-scale short liquidation highlights that bearish bets remain very weak if bullish momentum continues.

“Q3 is showing how resilient crypto can be under macroeconomic changes. The recent short liquidation serves as a wake-up call for trader sentiment,” said Daniel Ives, market strategist at Wedbush Securities.