Almost all Bitcoin price predictions and analyzes come to negative conclusions. This stimulates Bitcoin short-selling even with great leverage. But why is this unwise?
On-chain indicators are predicting bottoms
On-chain indicators are more reliable than mere predictions. And they have been backtested for decades of price history. Therefore, the decision based on the on-chain indicator will give a better probability of winning and a lower risk.
Take a look at the list of on-chain indicators below, the most reliable ones are showing historically rare levels. And most of the time at these rare levels they give accurate bottom predictions in the past.
Net Unrealized Profit/Loss (NUPL): profit/loss ratio has dropped below zero and is showing signs of turning up. It is showing the equivalent of the sell-off in March 2020 because of the pandemic.
MVRV Ratio: This ratio helps to determine if the Bitcoin price is being overvalued/undervalued. It is now below 1 indicating that this is an undervalued zone.
Realized Cap – UTXO Age Bands: shows that the market is left with only long-term holders.
Three signs to catch the bottom of Bitcoin, all three signs are now close to the bottom. Thus, shorting Bitcoin now can be seen as going against the predictive character of on-chain data in the past.
Once it has grown, Bitcoin will have no end
The Bitcoin price has the ability to stimulate greed and fear quickly reaching extremes. Observing the Crypto Fear & Greed Index, the past few days have had many days below 10 points. And statistics show that most will give a profit if buying at such times.
If you’re a long-time investor, you’ll find that a common feature of cryptocurrency market sentiment is the transition from extreme fear to extreme greed in a very short time.
As long as Bitcoin increases by 20-25%, it will create an instant positive sentiment, to the point that it can change the game. That’s what happened in 2015, 2019, and 2020.
From a technical point of view, if the weekly EMA100 is taken as the boundary, the Bitcoin price will decrease by about 50% from this EMA100. Then the price will enter the pump & dump phase to recover gradually. Currently, the Bitcoin price has also dropped more than 50% since the above EMA100.
Technical analysis based on major cyclical indicators such as the weekly RSI, or the weekly MA100, all show that the BTC price has reached the bottom of a super bull cycle. So shorting Bitcoin right at the super-cycle bottom is clearly a reckless decision.
Sharks are taking advantage of the opportunity to hunt for liquidity
When the “hold to die” strategy fails to work in a downtrend, the sharks/whales will tend to hunt for large margin positions.
The pessimism has stimulated more and more small short-selling orders. Add to that the bad news and negative forecasts, retail traders tend to be more confident with short Bitcoin orders. That’s an opportunity for the team to get into the liquidation position.
That is the reason that in the recent period, the volume of both Long and Short orders being liquidated continuously reached high levels, becoming headlines in the market media. As these positions accumulate for days, it only takes one to two Bitcoin H1 candles with a 10% margin to get traders liquidated.
Thus, combining the above factors, it can be concluded that continuously shorting Bitcoin at this time is an unwise decision. Unless you are really a professional trader who knows how to determine and accept how much to lose per bet.
DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.
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