Bitcoin prices’ sharp short-term rebound triggered a wave of short liquidations, exacerbating market volatility.

In early July, the cryptocurrency market experienced a strong recovery, with Bitcoin prices exhibiting a rapid rebound. Short-term bullish momentum was concentrated, leading to the forced liquidation of numerous short contracts and significantly amplifying market volatility.

Data shows that Bitcoin prices surged from its low of $57,000, accumulating a gain of over 8% in just four trading days, reaching a high of $63,000. The core driver of this rally was positive macroeconomic data: the US June non-farm payroll data significantly missed market expectations, rapidly increasing market expectations for a Federal Reserve interest rate cut. Gold, cryptocurrencies, and other risk assets also strengthened, and investor sentiment improved marginally.

The continued Bitcoin price surge triggered a massive short-selling spree in the derivatives market. Statistics show that over 65,000 traders were liquidated within 24 hours of the price surge, with a total liquidation amount of $208 million. The liquidated positions were predominantly short. A large number of short positions were forced to close out at a loss, further pushing the price up and creating a typical short squeeze.

After the price surged, it faced downward pressure and fell back. As of July 6th, the price of Bitcoin had fallen back to around $62,600, with increased divergence between bulls and bears and significantly higher short-term volatility. Market analysts believe that this rebound was mainly driven by improved expectations for macro liquidity and the combined effect of a short squeeze, rather than a long-term reversal signal in fundamentals. The market will continue to be influenced by multiple factors, including expectations for Federal Reserve policy and global cryptocurrency regulation, and the risks associated with high-leverage contract trading are significant.