Bitcoin price spike to $64.5K was ‘low-volume liquidity trap’: Analysis

Bitcoin (BTC) short liquidations hit their highest in almost one month as it hit $64,500 on Monday, new data reveals.

Key points:

• Bitcoin passed $64,000 thanks to a short squeeze on derivatives markets, CryptoQuant says.
• An ongoing downward funding-rate reset from 0.006% to 0.003% over 24 hours could mean further short squeezes.
• The absence of spot demand raises doubts whether the upside is sustainable after a week of $267.2 million in net ETF outflows.

Bitcoin short liquidations near one-month high 

BTC/USD rallied after Sunday’s weekly close, gaining up to 3% on Monday to top out at one-week highs of $64,550 on Bitstamp. 

BTC/USD one-hour chart. Source: Cointelegraph/TradingView

Examining the impetus behind the latest BTC price gains, onchain analytics platform CryptoQuant pointed to illiquid markets and funding-rate imbalances among exchanges.

Before rebounding on Monday, BTC circled near $62,750. Around this level, funding rates between exchanges began to diverge. Shorts were dominant on major platforms such as Binance, Bybit, OKX and Deribit, while the funding rate on HTX briefly spiked to 0.05%.

Funding rates refer to periodic payments exchanged by long and short traders on Bitcoin derivatives markets in order to maintain their positions. Positive aggregate funding rates show that long traders are actively paying shorts, with the reverse true for negative funding rates.