On Tuesday, a trader lost $1.94 million on a bet that the price of Bitcoin would fall. This loss wiped out all the $1.71 million in profits they had earned from 11 successful trades in a row.
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 Wipeout
The trader had closed a 700 BTC short valued at $56.68 million, exiting at a $1.94 million loss. The net result across all 12 trades was a negative total PnL of roughly $230,000. Eleven wins wiped out by one.
The trader had eleven successful short trades, each averaging around $155,000 in profit. However, the final trade was much larger – about twelve times bigger than the average – and resulted in a $1.94 million loss. This suggests the trader took a much bigger risk on the last trade compared to the previous ones.
This is a well-documented pattern in trading psychology where a run of consecutive wins builds overconfidence, leading traders to scale up at exactly the wrong moment. In crypto’s leveraged markets, the consequences are not abstract as they settle onchain, permanently, up for anyone with decent analytics knowledge to see.
Bitcoin’s Short Squeeze Was the Trigger
What forced the exit was bitcoin’s move above $81,000, which occurred thanks to a convergence of factors. April’s spot BTC ETF inflows, for starters, reached $2.44 billion, the strongest monthly institutional buying since October 2025. Fidelity, too, added $19 million into its FBTC product as the ETF complex snapped a three-day outflow streak, confirming that institutional buyers were stepping back in decisively.
Amidst this, leveraged short sellers who had positioned for continued weakness found themselves caught on the wrong side of a market with institutional support and macro tailwinds. Bitcoin’s climb through key resistance levels triggered a cascade of forced closings across major exchanges, with wallet 0x004e being one of them.
Extended periods of declining prices often allow short sellers to consistently profit, strengthening their belief that the price will continue to fall. However, when the market finally turns around – and does so sharply – the resulting rush to cover those short positions happens quickly and affects everything, regardless of its actual value.
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2026-05-05 13:57