An analyst says the recent crisis in BitFinex’s short position in Bitcoin could see prices rise in the spot market.
Bitcoin bears should be careful as the number of margin shorts on the Bitfinex exchange drops by around 25%.
The data shows that after the trading session opened at 14,897 BTC, the margin shorts fell to 11,066 BTC. Meanwhile, that decline came as part of a larger downward move that began on July 15th. In a single day, all of the margin shorts hit 17,053 BTC.
BTCUSDSHORTS has fallen on a bearish correction | Source: TradingView
In short, BTCUSDSHORTS represents the number of bearish positions on Bitfinex, measured in BTC. Traders borrow money from Bitfinex to bet on a declining result for Bitcoin. However, traders have reduced their leveraged bearish exposure to the Bitcoin market.
Prominent trader Scott Melker said that every time BTCUSDSHORTS crashes on Bitfinex, the price of Bitcoin on the spot market will rise, adding that he will be on the lookout for signs of a similar bullish reaction.
Bitfinex whale may start taking these shorts down. Every time they fall, the price has gone up. Will watch. pic.twitter.com/5F40LYjMVL
– The wolf of all streets (@scottmelker) July 16, 2021
“Bitfinex whales may start dropping shorts. Every time they fall, the price rises. “
A closer look at the correlation between BTCUSD and BTCUSDSHORTS reveals an erratic correlation. Short positions on Bitfinex began to decline after December 2020, a period that coincided with a surge in Bitcoin’s spot and derivatives markets.
In April-May, the decline in Bitfinex short positions coincided with the rise in Bitcoin price from below $ 45,000 to a record high of $ 65,000.
Recent correlation between Bitcoin spot price and short positions on Bitfinex | Source: TradingView
However, the Bitcoin Short suffered in June – the biggest – keeping Bitcoin stable above the $ 30,000 psychological support if it didn’t pump it out completely.
Downward pressure on Bitcoin remains despite the recent decline in Bitcoin short positions as Grayscale Investments unlocked shares in Grayscale Bitcoin Trust (GBTC) valued at 16,000 BTC today (July 18) after a six-month lock-up period.
JPMorgan & Chase strategists, led by Nikolaos Panigirtzoglou, warned in June that Grayscale’s unlock event could become the source of the next wave of sales in the Bitcoin market.
On-chain analyst Willy Woo reiterated similar concerns last week, stating that GBTC’s premium is falling compared to the bitcoin units held in Grayscale’s reserves, causing direct investors to be pulled away from the spot market .
“Investors now have more incentive for GBTC shares than for Bitcoin, which eases the buying pressure on the spot market somewhat. That is a downward trend. “
As the Bitcoin Short (bullish) offsets the GBTC unlock event (pessimistic), the Bitcoin spot market price holds $ 31,000 as temporary support.
Bitcoin repeatedly tested the range between $ 30,000 and $ 31,000 as support before bouncing back higher. Its maximum rebound could push the price through the $ 35,000 resistance level. However, profit-taking sentiment drove them back down to the $ 30,000 level.
As a result, pessimistic sentiment towards Bitcoin among analysts is extremely high, below $ 30,000.
For example, analyst Fomocap notes that Bitcoin could fall to $ 20,000 if it closes below $ 30,000.
Weekly. Price is declined from 39k. Then 35k. Continue to press down with higher pressure. Below the middle channel. Breaking below 30k definitely comes with 20k support. This is how gravity works. But still holds up until now .. #Bitcoin pic.twitter.com/2qpKWGL4cF
– Fomocap (@Workedia) July 16, 2021
“Weekly. The price went down from $ 39,000. Then $ 35,000. Keep pushing down with more pressure. Below the intermediate channel. A break below $ 30,000 will inevitably slide toward the $ 20,000 support. Here’s how it works Gravity. But keep it up until now. “
NebraskanGooner also believes Bitcoin will be hit hard if it falls below $ 30,000.
Everyone is talking about $ 30,000.
As far as concerned, this is the support that must be kept to avoid an atomic bomb. pic.twitter.com/t4Vv2msdAw
– NebraskanGooner???? (@nebraskangooner) July 14, 2021
“Bitcoins”
Everyone is talking about the $ 30,000 mark.
This is the support that must be maintained in order not to be attacked. “
The formation of a potential inverted cup and handle will cause Bitcoin to drop below the $ 30,000 to $ 31,000 range below $ 20,000 on the next breakdown, as shown in the graphic below.
Inverted cup and handle pattern on the Bitcoin chart | Source: TradingView
Woo relies on the chain’s fundamentals to predict a bullish outcome. He said smart money sales have ceased as long-term investors pile up Bitcoin at its peak as the price hits the $ 30,000 support level.
Bitcoin Net Flow on spot exchanges over 2 weeks moving average | Source: Willy Woo Newsletter
“Bitcoin is shifting from speculators to long-term investors at a rate not seen since February, when the price rose from $ 30,000 to $ 56,000.
I expect the price to break out of the downtrend next week, followed by a rally into the $ 50,000- $ 60,000 region before further consolidation. “
Mr. Teacher
According to Cointelegraph
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