The bitcoin price is on the rise in 2023 and is currently back at $ 22,900. Today there is talk of a possible push to the $ 25,000 price from various angles and that could theoretically lead to a whole mountain of short liquidations.
What is a short liquidation?
We speak of a short position when someone borrows an asset and then sells it. You do this if you feel that the price will fall in the short term. You borrow the asset, sell it at the current price and buy and return the asset as soon as the price has fallen.
That can be an attractive way to make a lot of money in the short term, but if the price continues to rise, it will cause huge problems. We are currently in a period of considerable price increases and people with short positions are starting to sweat a lot.
If the price suddenly rises explosively, many short traders will be in trouble. At some point, they must close their position and buy back the bitcoin they borrowed and sold to honor their commitments. If this happens on a large scale, we speak of a short squeeze.
At the moment, the price increase is squeezing a lot of shorts out of their position and they are forced to buy bitcoin. During these events, the price often gets an extra boost, because a whole group of shorts are forced to buy more. This creates an upward momentum that can be very dangerous for people who speculate on falling prices.
When does this start?
If we are to believe Philip Swift’s analysis, we will encounter the first large hurdles of short positions at the price of $ 23,400. At that point, we are likely to see the first liquidations, which could then trigger a chain reaction.
“This price level continues to serve as a resistance,” Rekt Capital said of Bitcoin’s $23,400 price. “Bitcoin needs to reclaim the $23,400 as a fulcrum to continue rising, otherwise there is a high risk of a lower high,” the analyst continues.
#BTC performs a Weekly Close below the ~$23400— Rekt Capital (@rektcapital) January 23, 2023
This level continues to act as resistance$BTC needs to reclaim this ~$23400 as support to move higher, otherwise there is a risk of a new Lower High forming relative to the Summer 2022 highs#Crypto #Bitcoin https://t.co/5ZfvNLiKpJ pic.twitter.com/IkBIXzUdsF
A lower high is often an indication of the end of an uptrend. In that regard, it is good to keep an eye on the charts so that you can continue to monitor the momentum of the trend. For now it is a matter of waiting, but the positive scenario is in any case on the table.