Bitcoin, Ethereum Surge Triggers $1 Billion Short Liquidations

Bitcoin and Ethereum have recently experienced a significant surge, leading to a wave of forced deleveraging. On the 8th of May, nearly $1 billion in liquidations occurred, with a substantial 80% of these liquidations coming from short positions. This event is characteristic of a short squeeze, where a rapid increase in the price of an asset forces traders who have bet against it to close their positions at a loss. The aftermath of this squeeze has left a trail of financial wreckage, with 139,241 traders liquidated in a 24-hour period, resulting in total liquidations of $328 million. Despite the bullish momentum, long positions took a significant hit, losing $170 million, which is indicative of the late-stage volatility often seen in such market conditions.

The current market situation is precarious, with both Bitcoin and Ethereum hovering above key resistance-turned-support levels. Technical indicators are flashing red, with the Relative Strength Index (RSI) showing that both assets are in overbought territory. Historically, this has been a point where momentum stalls and tactical shorts begin to enter the market. The On-Balance Volume (OBV) has also started to stall, suggesting that the retail-driven rally may be running out of steam. Open Interest (OI) has climbed by 1.25% to $137.44 billion, indicating that leveraged exposure is back in play. However, this increase in oi, coupled with thinning bid walls, could set the stage for another liquidation cascade if support levels falter.

Ethereum has already seen a $61.25 million long closure in the past 24 hours, while Bitcoin wiped out over $600k in longs in the 4-hour timeframe. The $170 million long squeeze might have just been the opening act, and if the market stumbles, things could get messy fast. The next move in the market will depend on how smart money deploys its capital. Whale activity at these levels typically signals one of two scenarios: a distribution trap or a controlled consolidation above supply. Either way, the order books are about to get tested, and it’s the whales who’ll decide whether this is re-accumulation or exit liquidity.

Ask Aime: Could the recent surge in Bitcoin and Ethereum prices lead to a massive sell-off, potentially wiping out many long positions?

Momentum indicators are flashing exhaustion, and opportunistic shorts are stepping in. Recent data spotted a whale moving $13 million USDC to Hyperliquid, shorting both Bitcoin and Ethereum—a tactical bet on a near-term reversal. Unless smart money steps in to force continuation and trap bears once again, the thin bid-side and exhausted upside momentum could flip the script. If the bulls fumble here, we may be looking at the beginning of a cascading unwind, potentially leading to payback for the $1 billion in short liquidations swept earlier this week.