Home Daily Analysis Crypto Market sentiment Bitcoin: Huge Spike on the Shorts- What does it Mean?

Bitcoin: Huge Spike on the Shorts- What does it Mean?


Today’s price action on the bitcoin has been sluggish for the third consecutive day. A few moments ago, it tested the 10,000 psychological level, having a bounce off of it. See, below, the 1H BTC chart showing the price action of this test in this TradingView interactive chart.  It seems the correction is at a critical state.

Given that bearishness, people looked at the evolution of the short positions and spotted a massive spike in the BTC short positions yesterday; which went from almost 30,000 short positions down to 9,700. This is the smaller number of short positions the BTCUSD has experienced since February 2018

The chart looks quite odd because this huge drop in the shorts apparently must have been accompanied by more positive and bullish price action. So, what might have caused this event?

CryptoPotato.com reported that a similar although not so strong event was seen on April 8, 2019. At that time, the price also was not affected by it. I was curious about it, so I’ve made a chart with BTC price evolution and marked similar events in the past.

The implications are for everyone to see. Each time an event occurred this year, it was followed by a bullish price movement of considerable proportions. History doesn’t need to repeat itself,  but at least the event should act as a warning sign for people shorting the cryptocurrency at these levels.

Long Squeeze

The number of longs on the BTC has dropped from close to 27,000 at the peak down to 20,000 currently, but the current shorts positions are about 11,000.

When the longs outnumber that way the shorts, they may be facing what is called as a long squeeze, where the price experience a significant drop forcing the longs to liquidate, as is happening today. It also happened last May 16. Therefore, we should be cautious, especially when trading on margin.



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