The impact of the recent liquidations in Bitcoin futures markets

While the Chicago Mercantile Exchange (CME) trades USD-settled contracts for Bitcoin futures, where no physical Bitcoin changes hands, these futures markets undoubtedly play a crucial role in shaping spot prices.

In the same seven-day period, a mere $200 million worth of BTC futures shorts were liquidated, representing only 1% of the total outstanding contracts.

Bitcoin (BTC) hit a fresh 19-month high above $42,000 Monday, fueled by some “panic buying” as expectations for lower interest rates, looming spot bitcoin ETF decisions and flows into digital asset funds supported rising crypto prices.

The largest crypto asset by market capitalization moved quickly over the weekend after it cleared significant resistance at $38,000, a level that capped prices for the most part of November.

BTC late Monday afternoon was holding right around $42,000, up 5.8% over the past 24 hours.

Why bitcoin rallied

Bitcoin’s rise is still dominated by anticipation for a spot bitcoin exchange-traded fund (ETF) in the U.S., with market observers overwhelmingly expecting an approval by the U.S. Securities and Exchange Commission (SEC) in early January.

Matrixport, a crypto investment services provider, reported on Monday that there were elevated levels of bitcoin perpetual futures premium versus the spot price. This suggests that traders were rushing into BTC due to fear of missing out on the rally, also known as FOMO.