There is speculation that the 0x61 trader, who holds a $12M highly levered $ETH short, will face liquidation if $ETH hits $1945.
However, a deeper analysis suggests that people may not be seeing the complete picture.
The consensus suggests the short will be liquidated if ETH hits 1945.
However, there are limit orders set to add $149k to his collateral within the 1935-1945 $ETH price range.
If triggered, this could push the liquidation price to around $1967.
The chart below shows how his liquidation price changes with $ETH's price variations.
Until $ETH hits $1935, the liquidation price remains at $1945.
However, the limit orders are triggered when $ETH enters the 1935-1945 range, driving the liquidation price to $1967.
Currently, 0x61 has approximately $224k worth of assets distributed across Arbitrum and BNB Chain:
• $USDT: $90k
• $USDC: $51k
• $WBTC: $64k
• $AAVE: $21.5k
With a history of mitigating liquidation risk by bridging tokens from other chains to Arbitrum for collateral, we'll probably see a similar strategy if $ETH prices increase.
The $224k in available assets could be used to top up collateral in this scenario.
Considering both the existing limit orders and potential collateral top-ups, we have modelled a hypothetical scenario where the trader exhausts all his remaining assets in order to avoid liquidation.
In this case, the maximum liquidation price could reach around $2000 - 6.5% above the current price, a significant increase from the commonly believed $1945 target.
For simplicity, we've assumed collateral top-ups are evenly distributed across the 1967-2000 $ETH range.
While his position appears risky, the danger of liquidation is not as imminent as popularly believed, as he has mechanisms at his disposal to protect his position.
Additionally, it is also possible he could have his position hedged in other markets that we are unaware of.
Nonetheless, it's important to remember that this analysis assumes that the GMX trader will use all available resources to avoid liquidation.
Real-world actions can, of course, vastly differ based on many unpredictable factors.
He can't keep adding forever 🐂🐂🐂