Short Squeeze Triggers $400M Liquidations, Three-Month High

Short-position liquidations in the cryptocurrency market surged to $322 million over 24 hours, the highest level since Black Friday on October 10, triggering a broad rally across major digital assets.

The data underscores a dramatic shift in market sentiment as traders who had bet against prices were caught off guard by the sudden surge.

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ETF Inflows Fuel Institutional Momentum

According to Coinglass data as of 2:00 am UTC on Tuesday, short liquidations accounted for 77.67% of total liquidations, which reached $414.65 million. Approximately 109,672 traders were liquidated during this period. The largest single order occurred on HTX, where a BTC-USDT position worth $91.33 million was forcibly closed.

The rally appears to have been fueled by renewed institutional interest in Bitcoin. US spot Bitcoin ETFs recorded net inflows of $471 million on January 2, according to SoSoValue data. This marked a sharp reversal from the $348 million outflow recorded on December 31. A signal that institutional appetite returned swiftly after the New Year holiday.

Cumulative net inflows into US spot Bitcoin ETFs have now reached $57.08 billion. Total net assets stand at $116.95 billion, representing 6.53% of Bitcoin’s total market capitalization.

The squeeze exposed a stark divide between institutional and retail positioning. While retail traders had crowded into short positions ahead of the move, institutional traders held a net long position at 76.52%, according to market data. The divergence suggests that smart money anticipated further upside. Smaller players remained bearish—a bet that proved costly when prices reversed.

Major Cryptocurrencies Post Strong Gains

Bitcoin climbed to trade around $93,700, recovering from the consolidation phase that dominated late December. Altcoins posted even stronger gains. XRP led the surge at 10.8%, followed by Ethereum and Solana at 0.8% and 0.5%, respectively. On a weekly basis, gains were more pronounced, with XRP up 28.8%, Solana up 11.8%, and Ethereum up 9.6%.

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The 12-hour liquidation data showed particularly intense activity, with $345.15 million in total liquidations during that window. Of this, $305.43 million came from short positions, indicating that the bulk of the squeeze occurred in the latter half of the 24 hours.

Exchange Breakdown Shows Widespread Short Pain

The pain was not evenly distributed. HTX bore the brunt of the squeeze, recording $108.35 million in liquidations with a staggering 96.05% from short positions. This suggests that its user base had been heavily positioned for a downturn. Hyperliquid, favored by more sophisticated traders, showed a similarly lopsided 87.1% short ratio. Indicating that even experienced market participants were caught on the wrong side.

Binance, the largest exchange by volume, recorded $95.65 million in liquidations but with a comparatively lower 63.4% short ratio, reflecting its more diverse user base. The pattern points to a market where bearish conviction had built up broadly, leaving traders across platforms vulnerable when sentiment flipped.

Cascading Effect Amplifies Upward Momentum

The wave of short liquidations created a cascading effect throughout the market. As prices rose, bearish traders were forced to close positions at a loss, which in turn drove prices higher and triggered further liquidations. This feedback loop amplified the upward momentum across major cryptocurrencies.

“Short covering frenzy plus volume delta exploding gave Bitcoin its best price action in a long time,” noted crypto analyst Ardi on X. He observed that nearly $1 billion in shorts had been liquidated over recent days, adding that the liquidation map remains lopsided with heavy short positions stacked above current prices while few long clusters sit below.

The 24-hour long/short ratio has now balanced to 49.99% long versus 50.01% short, indicating the immediate squeeze has been absorbed. According to Ardi, $94,500 is the pivotal level to watch. A close and hold above could trigger further unwinding of overhead short positions.