Bitcoin (CRYPTO: BTC) experienced a severe flash crash this past month, causing it to drop over 70% below its all-time high.
Following Terra’s (CRYPTO: LUNA) black-swan event, CPI data on inflation, and the US Federal Reserve hiking interest rates, turbulent market conditions have continued.
While there are numerous investors who profit off Bitcoin by holding it, swing trading it, or longing it, there is a major category of Bitcoin bears, who profit off shorting it. Bitcoin is currently trading at $20,587, down from its all-time high of over $68,000.
Traders who shorted Bitcoin on May 31 with an entry price of $32,095 and exited at $20,587, assuming a 10x leverage, would have made a 558.99% return on equity. The same trade carried out with a 5x leverage would provide a 279.5% return on equity. If the same trade were undertaken with no leverage, the return on equity would be the profit percentage, i.e. 55.90%.
Also Read: If You Invested $1,000 In Bitcoin When Michael Saylor Said To Mortgage Your House, Here's How Much You're Down
While Bitcoin is relatively more stable, other altcoins experience much larger price volatility, especially during market crashes. Thus, traders who shorted the cryptocurrency market in the past month made significantly large profits, posing liquidation risks to large-scale long positions.
As market uncertainty continues, it is imperative for investors and traders to proceed with caution, only risking the capital that they can afford to lose.
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