The skyrocketing Bitcoin price and the liquidation of 2.5 billion yuan

Bitcoin surged again. After breaking through the $50,000 mark, Bitcoin traded sideways around $51,000 for many days until January 24, when it began to rise around $50,500. On February 27, Bitcoin's rise continued to expand, approaching $57,000 during the session, setting a new high since December 2021.

The rise of Bitcoin has attracted attention, and it has also brought about a crazy situation where more than 2.5 billion yuan of funds were liquidated. The risks cannot be ignored. In the view of analysts, whether Bitcoin rises or falls, players may face huge losses. This is a gambling game of fools, which truly reflects the speculation and high risk of the cryptocurrency market.

Bitcoin surges above $56,000

Data from the global currency price website Coingecko showed that on February 27, Bitcoin broke through the $56,000 mark, and the increase in the past 24 hours was close to 10%, reaching a high of $56,726.52, reaching its highest level since December 2021. As of 18:00 on February 27, Bitcoin was priced at $56,577.28, a 24-hour increase of 10.9%.

Image source: CoinGecko

After fluctuating around $40,000 for many days, whether it can break through the $50,000 mark has been an important part of the market speculation on the trend of Bitcoin in the past two months. But in fact, after a brief drop below the $40,000 mark on January 23, Bitcoin rebounded strongly and reached the $50,000 level within half a month. Looking at the timeline further, the price of Bitcoin has been on an upward trend for six consecutive months, an increase of nearly 125% compared to the low of $24,900 in September 2023. In particular, in February 2024, the monthly increase of Bitcoin has reached 30%.

Since reaching its all-time high in November 2021, approaching $70,000, Bitcoin has entered a long winter. In November 2022, the Bitcoin trading price hit a low of $15,500, and then began to rebound. According to Coingecko data, as Bitcoin prices rose, other mainstream cryptocurrencies also rose significantly. The current total market value of Bitcoin has exceeded $1.1 trillion, and the total market value of cryptocurrencies has also exceeded $2.24 trillion.

Why has the price of Bitcoin risen again in the past six months? Wang Peng, an associate researcher at the Beijing Academy of Social Sciences, told Beijing Business Daily that there are many factors affecting the current rise in Bitcoin. First, expectations for global economic recovery have increased, and investor confidence has increased, driving up the prices of cryptocurrencies such as Bitcoin. Second, with the formal approval of the Bitcoin ETF in the United States and the fact that February 26 is the settlement date for Bitcoin futures, more funds have flowed in, driving up prices.

"In addition, Bitcoin's halving event may also have a positive impact on the price. The halving event refers to the halving of Bitcoin's mining rewards, which reduces the supply of new Bitcoins and may support the price." Wang Peng added. However, Wang Peng also reminded that the fluctuation of Bitcoin prices is affected by many factors, including market sentiment, policy changes , technological innovation, etc., so comprehensive considerations are needed to evaluate price trends.

On January 11, 2024, the cryptocurrency market ushered in the long-awaited good news. The U.S. Securities and Exchange Commission officially approved the listing and trading of the Bitcoin ETF. The trading volume on the first day reached US$4.6 billion, which further promoted the increase in the trading prices of cryptocurrencies including Bitcoin.

The liquidation is still intensifying

Bitcoin's rise is frenetic, but some are happy while others are sad. As Bitcoin has been rising for days, especially on February 27, players who participated in the contract trading of the cryptocurrency circle, especially those who "short" suffered heavy losses.

According to data from the third-party currency price website Bijiayuan, in the last 24 hours ending at 10:40 on February 27, a total of 64,701 users had their positions liquidated, with a total of US$205 million in funds wiped out, equivalent to RMB 1.473 billion. As the price of Bitcoin fluctuates, the relevant liquidation data is still intensifying. In the last 24 hours ending at 18:00 on February 27, the number of liquidated users decreased slightly to 63,073, but the liquidation amount increased to US$358 million, equivalent to RMB 2.573 billion .

Image source: CoinHome

In the past 30 days, the total amount of liquidation in the entire cryptocurrency market reached US$3.681 billion, of which the proportion of "short" liquidation accounted for 90%.

" Now, the people standing on the balcony are all 'air force' speculators. " On February 27, a Beijing Business Daily reporter noticed that a user in the cryptocurrency circle joked on a social platform. The user explained to the Beijing Business Daily reporter that according to the rules of the cryptocurrency circle, virtual currencies including Bitcoin can be "long and short" through contract trading, and two-way trading can be carried out by analyzing and comparing the rise or fall, and the trading can be expanded by adding leverage. Once the price fluctuation level of the currency exceeds the corresponding limit range, the position will be forced to close by the system. "In this kind of soaring market, users who predict that the currency price will fall often suffer huge losses." The aforementioned user said.

In the face of the frenzied rise of Bitcoin, some users are deterred. Reader Zhang Xu (pseudonym) pointed out in an interview that the popularity of Bitcoin has declined in the past two years. In less than a year of speculation, he stopped losses in time after paying nearly 600,000 yuan in "tuition fees" and stopped participating in it. "Now that the price of the currency has risen, my friends who are involved have become active again. But from my personal practical experience, the risks of such transactions are really difficult to control. Ordinary users can easily lose all their money if they participate in it, so I will still keep a distance rationally." Zhang Xu said frankly.

In Wang Peng's view, whether Bitcoin rises or falls, some players may face huge losses. This is a gambling game, which truly reflects the speculation and high risk of the cryptocurrency market. Wang Peng said: "This also reminds us that the supervision and regulation of the cryptocurrency market is still an important issue, and relevant departments need to strengthen regulatory measures to protect the legitimate rights and interests of investors."

Chen Jia, a researcher at the International Monetary Institute of Renmin University of China and an independent international strategy researcher, pointed out that cryptocurrencies such as Bitcoin do not belong to the category of traditional low-frequency assets and cannot be analyzed using the year-on-year changes in traditional asset indicators . Their intraday fluctuations and frequencies are difficult for traditional financial institutions and individuals to understand and cannot be controlled by traditional investment and trading technologies. In addition, cryptocurrency transactions have always been highly leveraged, lacking risk hedging mechanism design and investor protection mechanisms, making it easier to cause liquidation.

Risks cannot be ignored

On February 27, the heat of the bitcoin price increase continued to ferment, and bitcoin also made it to the Weibo hot search list for the first time in a long time. In the discussion around the bitcoin price trend, some people advocated that "the bull market is coming and the prospects are unlimited"; some people could not forget the pain of being bloodbathed in the previous crashes; and some people pointed out that cryptocurrencies have been completely banned in the country, so give up the fantasy of getting rich as soon as possible... and the relevant pages also prominently reminded: Please stay away from illegal virtual currency transactions and beware of being deceived.

Image source: Weibo

On the other hand, after the previous plunge, the collapse of stablecoins and the runaway of exchanges, the trust in cryptocurrencies has been hit even harder. According to foreign media reports on February 22, a spokesman for the Nigerian president confirmed that Nigeria has asked its telecommunications companies and other Internet service providers to block people from accessing cryptocurrency trading platforms in order to prevent the continued weakening of the national currency.

On February 24, the Beijing Municipal Public Security Bureau's Cyber ​​Security Protection Corps also issued a risk warning on virtual currency. On the one hand, it stated that China currently does not recognize the legal status of virtual currency, and any activity involving the issuance of tokens for financing is illegal. On the other hand, it pointed out that there are still criminals who absorb funds by issuing so-called "virtual currency" and are suspected of engaging in illegal fundraising, pyramid schemes, fraud and other activities through hype on concepts. It emphasized that virtual currency is just "mirage" and what is lost is "real money", and it is necessary to establish correct monetary and financial concepts.

Regarding the behavior of speculating in cryptocurrencies, Chen Jia said that due to the sharp fluctuations in cryptocurrency transactions and the lack of necessary regulatory protection mechanisms, whether it is on-site trading or over-the-counter trading markets, whether long or short, except for a few institutions and dealers that specialize in high-frequency trading, most investors will find it difficult to escape the fate of being eliminated.

Wang Peng suggested that ordinary users should not blindly follow the trend of Bitcoin price increase and make decisions based on their investment goals and risk tolerance. They should fully understand the risks of price fluctuations and assess their risk tolerance. At the same time, they should pay close attention to the regulatory policies of relevant departments on the cryptocurrency market and ensure that their investment behavior complies with the requirements of laws and regulations.