MAC_D2024-01-11

BTC Buying Strategy Using Futures Liquidations

Before we can use this strategy, we need to understand the nature of futures position Liquidations and price action. It is commonly believe that when a large number of futures positions are liquidation, the price trend will extend in the direction of the closed positions. However, the actual price action often does not. The chart shows an upward reversal when a large number of long positions are liquidated after a sharp drop, and a downward reversal when a large number of short positions are liquidated after a sharp rise. The reason for this move is that after a large number of futures positions have been liquidated, additional liquidations have not followed. For example, if the price drops sharply and a large number of long positions are liquidatied, and no additional long position closures (long squeeze) occur, the price will fail to fall and reverse to the upside. Looking at the chart again, we've superimposed an indicator of the amount of liquidation(USD) of long and short positions on the 1-hour timeframe chart, with $10 million, $30 million, and $50 million liquidations as baselines. We are currently in a recovery and upward rally phase according to on-chain cycle indicators such as MVRV, so the right way to react to a price correction is to go long. So if your long position has been liquidated for more than $50 million, it's an opportunity to buy Bitcoin on the cheap, and you should take it.