Bitcoin Moves Higher, Putting Shorted Altcoins at Risk of Liquidation
As bitcoin (BTC) continues its upward trajectory, alternative cryptocurrencies such as Solana’s SOL may face leveraged liquidations and exaggerated price rallies. Since briefly dropping below the crucial support level of $25,000 on Monday, bitcoin has surged over 6% and is currently trading near $26,600, according to CoinDesk data.
The positive retail sales and factory output data from China in August, released early Friday, has boosted investor sentiment and paved the way for further price gains in major cryptocurrencies. Bitcoin cash (BCH) has witnessed the highest increase, rising 8% in the past 24 hours. Maker DAO’s MKR follows closely behind with a 5% rise. Other altcoins like XRP, Ether (ETH), Solana (SOL), Tron’s TRX, and dogecoin (DOGE) are all experiencing upward movement in correlation with bitcoin.
This altcoin bounce comes just days after traders sold off these tokens, anticipating potential asset sales by FTX, a multibillion-dollar cryptocurrency exchange that is currently facing bankruptcy proceedings. The recovery in altcoins now poses a risk to bearish traders who had taken leveraged bets on the decline of SOL and other tokens due to potential sales by FTX creditors.
“Upbeat China August retail sales and factory output data released early Friday revived risk sentiment in financial markets, clearing the way for continued price gains in the leading cryptocurrencies,” said an industry analyst.
While the rise in bitcoin’s price has unlocked opportunities for traders, it has also increased the likelihood of leveraged positions being liquidated for shorted altcoins like SOL. The exaggerated price rallies in these alternative cryptocurrencies further elevate the risk of liquidation for traders who had bet against their rise.
Bitcoin’s ongoing upward movement reflects its resilience and growing dominance in the cryptocurrency market. As the leading digital currency continues to gain traction, it has a significant impact on the valuations and performances of other cryptocurrencies.
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