The Short Crypto Liquidation Wave Successfully Triggers Breakthroughs for Bitcoin and Ethereum

Bitcoin and Ethereum experience significant price jumps that trigger a series of massive liquidations on crypto short positions. This breakthrough momentum creates a chain reaction across the derivatives market, with nearly $700 million position heads being forcibly closed.

Leading Cryptocurrency Price Action

Bitcoin managed to break through the critical resistance level of $95,000, continuing its rally to reach $97,800 during the US trading session. This breakthrough marks a perfect gap fill after the price was trapped in consolidation for about two months. In the last 24 hours, the largest cryptocurrency recorded a 3.5% increase.

Meanwhile, Ethereum showed a more aggressive performance with a 5% rally reaching $3,380, surpassing the psychological level of $3,300 for the first time in that period. The simultaneous rise of these two major crypto assets creates a market condition favorable for buyers but fatal for traders betting on a price decline.

Dynamics of Forced Liquidation: Understanding Short Crypto Liquidations

The sharp price surge triggered a wave of liquidations across the market, wiping out all short crypto positions. According to data from CoinGlass, a total of $700 million in leveraged short positions have been completely wiped out. Of this amount, about $380 million are forced out of Bitcoin shorts, while more than $250 million come from Ethereum traders who shorted their positions.

Liquidation mechanisms occur when traders place leveraged bets on falling asset prices, but the price moves sharply in the opposite direction. In this scenario, the trader’s margin or collateral is no longer sufficient to cover potential losses. Exchanges or brokers automatically close these positions at the current market price, forcing sales and deepening downward pressure on short positions simultaneously.

“Breaking above $95,000 triggers significant crypto short liquidations, creating a forced demand from organized position closures,” said Gabe Selby, head of research at CF Benchmarks. This phenomenon is known as a short squeeze—where the accumulation of short positions is forcibly closed simultaneously, creating a positive feedback loop on the price.

Is This Breakthrough Supported by Fundamentals?

Although crypto short liquidations create dramatic momentum, analysts question whether the price increase is truly driven by strong fundamentals. According to Selby, the price rally “appears largely mechanical, driven by market makers strategically pushing prices higher to resolve supply-demand imbalances left from sharp declines in October and November.”

This interpretation suggests that the rise may be more of a technical adjustment rather than a sustained market sentiment change. However, Joel Kruger, a market strategist at LMAX Group, offers a more optimistic perspective. “Breaking through $95,000 is an important green signal for the broader digital asset market to start taking risks,” Kruger said in his analysis that day.

Market Indicators: Can the Momentum Continue?

Several technical indicators show potential for the current rally to sustain. Kruger points out that the price surge is accompanied by solid trading volume, indicating that new demand is entering the market, not just redistribution from existing holders.

In parallel, the funding rate (funding rates) across the perpetual swap market remains low, a key sign that the price increase is not driven by excessive leverage speculation at the overall market level. This differs from a bubble scenario—where high funding rates indicate massive leverage.

The broader crypto market also shows solid breadth. “Some large-cap assets are following Bitcoin and Ethereum, posting strong gains along with a return of risk appetite,” Kruger added.

Next Target: $100,000 and All-Time Highs

Bitcoin’s previous all-time high was $126,000, reached in early October last year. With the $95,000 breakthrough, the market is starting to whisper about the possibility of retesting that high or even breaking above it.

Kruger emphasizes support from traditional markets as an additional factor. “Stocks remain strong, and bond yields have stabilized, potentially helping to push crypto higher,” he said. This dynamic creates a more supportive macro environment for risk-on sentiment.

However, to confirm a sustained upward push, Kruger identifies two key levels. “A weekly close above $95,000 for Bitcoin, or a break above $3,500 for ETH, will provide an important confirmation signal for a renewed rally,” he noted in his research report.

Macro Risks: Inflation and the Fed’s Response

Although momentum has turned bullish, macro analysts warn of potential headwinds. According to recent studies by Adam Posen (Peterson Institute) and Peter R. Orszag (Lazard), inflation in the United States risks rising above 4% this year.

Researchers identify several inflationary factors: Trump-era trade tariffs, a tight labor market, the possibility of large-scale migrant deportations, and expanding fiscal deficits. These factors could outweigh productivity gains from AI and falling housing inflation.

If inflation indeed accelerates, the Fed may be reluctant to cut interest rates as aggressively as the market and crypto investors expect. This could correct the highly bullish risk-on expectations in the digital markets.

Conclusion: Mechanical Breakthrough with Potential for Sustainability

The massive liquidation of crypto short positions triggered by Bitcoin and Ethereum breakthroughs creates spectacular but “mechanical” momentum. While market fundamentals have not shown serious changes, technical indicators such as volume, funding rates, and market breadth provide positive signals that the upward push may have enough legs.

The $100,000 target for Bitcoin and $3,500 for Ethereum are now within reach, with potential retests of all-time highs. However, macro headwinds related to inflation and Fed policies remain material risks that crypto investors should monitor in the medium term.