Crypto's Latest Rebound Was Fueled By Fresh Liquidations

A brief rally in cryptocurrency prices was driven by a fresh wave of liquidations in bearish bets on Ether, the second-largest cryptocurrency, with prices spiking as financial markets were whipsawed by a deluge of US economic reports and retreating oil prices. The move suggests prices are being driven more by speculation than actual demand. Traders have largely stayed on the sidelines since the August rally given the lack of clear catalysts following the forced deleveraging. Over $300 million in short positions for Ether has been liquidated over the last 24 hours, with $212 million in bearish bets on Bitcoin wiped out in the same period. The recent range-bound trading looks like consolidation with fading short-term momentum rather than a confirmed structural breakdown, according to Lacie Zhang, a research analyst at Bitget Wallet. A short squeeze also played a role, with traders paying to be short into an 8% rally. 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. Over $668 million worth of bets from both directions across all digital assets were liquidated in the past day, reaching an elevated level since the record short liquidation in Bitcoin last month. Liquidations in bets on Ether have slowed down and eventually reversed its direction in the past hour.