Bitcoin Traders Who Bet on a Drop—Then a Rally—Got Caught: What Do the Data Show?
Bitcoin’s biggest short liquidation of the week occurred eight hours before U.S. jobs data, while the decline after the data release hit positions betting on a rally.
According to Glassnode’s weekly analysis, markets lowered the odds of the Fed raising rates again in October, while Bitcoin gained only about 1% over the same period. The gap between the shift in rate expectations and price movements was especially clear among leveraged traders before and after the jobs report.
$50 million in shorts liquidated in ten minutes
On Friday, October 2, at 07.20 TRT, $50 million in short positions were liquidated in just ten minutes. This wave, in which positions held by traders expecting a decline were forcibly closed, occurred about eight hours before the jobs report and at a time when no major economic data was being released.
The direction reversed after the report was released. As Bitcoin fell, $11 million in long positions were liquidated; short liquidations remained at $2 million over the same period. By 18.40 TRT, Bitcoin had fallen more than 1% below its pre-data price.
In the 24 hours before the data, the dollar value of open interest rose by $2.1 billion. Some of that increase came from Bitcoin’s price rise, but BTC-denominated positions also grew by about 2.5%. After the data, open interest continued to rise for a while, then fell by $1.5 billion as the price declined.
Fed expectations shifted, but Bitcoin’s gains remained limited
According to Glassnode’s calculation based on interest rate futures, the probability of a quarter-point rate hike on October 28 fell from 66% on Monday to 22% by Friday afternoon. The sharpest decline came after New York Fed President John Williams said there was no need to rush into another hike; the rate fell to 50% within two hours.
Core PCE inflation, which came in below expectations, lowered the probability by another 10 points the following day. September employment rose by 29,000, below the 84,000 expected in the Dow Jones survey cited in the report.
Bitcoin rose 0.4% in the half-hour after Williams’s remarks, but gave back its gains from the PCE data within three hours. The strongest short squeeze came before the jobs data, indicating that the week’s major leverage move did not begin directly with the report’s release.
October 14 is the next key date
The analysis identifies the September CPI data due on October 14 as the next major test. Core inflation exceeding expectations could once again strengthen the odds of an October rate hike.
In the options market, no significant premium had built up for short-term volatility ahead of the jobs report; expected volatility declined after the release. The price and liquidation data in the analysis cover the period through the afternoon of October 2.