Key Takeaways:
Wallet 0x004e closed a 700 BTC short on May 5, booking a $1.94M loss on a single trade. The loss erased $1.71M earned across 11 consecutive profitable bitcoin short positions. Bitcoin’s push above $81,000 triggered a broad short squeeze, forcing leveraged bears to cover losses. The Math Behind the WipeoutThe numbers are straightforward as the eleven profitable shorts averaged roughly $155,000 in gains each. The final trade, nearly 12 times larger in notional size than the average gain implied by that profit stack, swung $1.94 million against the trader. The disproportion between the final position’s notional size and the earlier trade scale suggests a significant increase in exposure on the last bet.
Prolonged drawdowns are known to create an environment where short sellers build profitable streaks, and where the success of those trades reinforces the thesis that the downtrend is permanent. When the reversal comes, and comes with force, the unwind is fast and indiscriminate.
