A fresh wave of liquidations in bearish bets on Ether, the second-largest cryptocurrency, drove Friday's brief rally across digital assets. According to reports from Bloomberg, prices of most digital assets spiked as financial markets were whipsawed by a deluge of US economic reports and retreating oil prices. The moves were reminiscent of the volatility at the end of August, where a surge in Bitcoin helped to unleash the biggest wave of short liquidations on record going back to 2021.
Ether jumped as much as 8.3%, marking the biggest intraday increase since the spike three weeks ago, while Bitcoin increased by less than 4%. As reported by Bloomberg, both tokens have since pulled back from their highs. The quick market move suggests prices are being driven more by speculation than actual demand, with traders largely staying on the sidelines since the August rally given the lack of clear catalysts following the forced deleveraging.
According to data compiled by Coinglass, over $300 million in short positions for Ether were liquidated over the last 24 hours, with $212 million in bearish bets on Bitcoin wiped out in the same period. This represents a significant shift in leverage washouts, as Bitcoin typically sees the most leverage washouts. The total liquidations across all digital assets reached $668 million worth of bets from both directions, reaching an elevated level since the record short liquidation in Bitcoin last month.
As reported by Bloomberg, perpetual futures, which are the main contracts to make leveraged bets on crypto, have seen funding rates for Ether bets turning negative, meaning bearish traders were paying to stay in their positions. On Binance, about $76 million in Ether positions was liquidated in the past 24 hours, with most being short positions being closed. Adam McCarthy, head of research at trading firm LO:TECH, noted that the move is partially a short squeeze, with traders paying to be short into an 8% rally.
