Ether Dominates Futures Trading as Shorts See $200M in Liquidations

Crypto markets jumped in the past 24 hours as the U.S. Federal Reserve raised interest rates by 75 basis points as expected. Bitcoin (BTC) jumped 10% at one point following the Fed announcement, while ether (ETH) soared as much as 16%.

Total market capitalization increased 6.4%, one of the biggest gains in recent weeks as risk appetite returned among investors as they priced in lower rate hikes ahead. Ether led gains among majors, with Solana’s SOL, BNB, and Cardano’s ADA up 6.4% in the past 24 hours. Elsewhere, Uniswap’s UNI and bitcoin cash (BCH) added as much as 21%.

The upward movement caused over $200 million in liquidations on short trades and some $175 million on long trades. Over 72% of all liquidated traders were short positions, meaning a short squeeze may have contributed to some of the price gains among major cryptos in the past 24 hours.

A short squeeze refers to a sharp rise in the price of an asset that forces traders who previously sold short to close out their positions, usually leading to an increase in prices.

Crypto exchange OKX saw over $128 million in liquidations, the most among counterparts, with over 88% of traders betting on lower prices on the exchange.

Shorts are positions betting on market declines, while longs refer to bets on rising prices. Liquidation refers to when an exchange forcefully closes a trader’s leveraged position due to a partial or total loss of the trader’s initial margin. It happens when a trader cannot meet the margin requirements for a leveraged position (fails to have sufficient funds to keep the trade open).

Ether futures saw over $165 million in liquidations across shorts and longs. Data from Coinalyze shows trading volumes on ether has risen in the past weeks and crossed those of bitcoin - which led futures markets volumes.

A catalyst for higher ether volumes is the network’s upcoming Merge in September, which will shift Ethereum away from its current validation mechanism to a proof-of-stake network.