Bitcoin (BTC) has extended its rally over $46,000 on Feb. 9, a day afterward a U.Southward. Securities and Commutation Committee (SEC) filing revealed that Tesla bought $i.5 billion worth of BTC. The toll of Bitcoin immediately soared from around $39,000 to $45,000 across major exchanges on February. 8 later on the news began to spread.

BTC/USD 1-hour candle chart (Bitstamp). Source: Tradingview

Mass Bitcoin liquidation

As the Bitcoin cost initially rallied to $45,000, it caused $500 1000000 worth of brusque positions to go liquidated.

Bitcoin liquidation. Source: Bybt.com, Twitter (@cryptounfolded)

The term liquidation in the Bitcoin futures market refers to when the cost of BTC moves rapidly in a short menses across the liquidation prices of futures contracts.

For instance, if a trader borrows 10 times the base uppercase and trades a $100,000 Bitcoin position with $ten,000, the position would get liquidated after a 10% price move.

According to the data from Bybt.com, $1.34 billion worth of futures positions in the futures market were liquidated in the past 24 hours.

This indicates 2 trends; first, the derivatives market was extremely overcrowded with short-sellers. When the Tesla news broke, it caused a massive short squeeze, liquidating hundreds of millions of dollars worth of positions in several hours.

2nd, it shows that many investors did not anticipate Tesla to actually invest in Bitcoin even after Musk changed his bio to "Bitcoin" on January. 29, 2021.

What happens adjacent?

Meanwhile, cryptocurrency traders are cautious due to the extremely high funding rates across major futures exchanges.

BTC perpetual swaps funding rates. Source: Digital Assets Information

Funding rates increase when the majority of the market are buying or longing Bitcoin. When the funding rates are overly high, the market is vulnerable to a long clasp, which can cause an intense short-term drop.

Nevertheless, a cryptocurrency trader known every bit "Loma" says that the market is not overconfident just yet. He said that when a point comes where traders are overly confident and practice non expect a major drop, that is when a correction is likely to occur. He said:

"I desire us to become to that point where people kickoff talking nearly how it's incommunicable for us to retrace seventy-xc% earlier I think of closing my spot $BTC positions. I call up feeling like there'due south no way $BTC goes back below $10k in 2018. We went to ~$iii,500. Never say never."
Stablecoin inflows. Source: CryptoQuant

Meanwhile, CryptoQuant CEO, Ki Young Ju, emphasized that in that location is newfound buyer demand as stablecoin inflows into exchanges were spotted. In the virtually term, this would likely human activity as a catalyst for Bitcoin. He wrote:

"Y'all can call me crazy, but I call back we'll run into 50k soon. Simply got another stablecoins deposit signal."