Bitcoin (BTC) bears should be on the lookout for a potential hit as the number of margin short positions on the Bitfinex exchange drops by around 25%.
The record fell to 11,066 BTC at 12:20 GMT on Saturday, compared to 14,897 BTC at the start of the session. Meanwhile, the decline came as part of a larger downward move that began on July 15th. During the day, the total number of margin short positions reached 17,053 BTC.
In short, BTCUSDSHORTS represents the number of signed bearish positions on Bitfinex, measured in BTC. Traders borrow money from Bitfinex – their broker – to bet on a declining result for the BTC / USD instrument. However, the latest data shows that traders have reduced their lever-based bear market in the Bitcoin market.
Bitcoin expects an increase?
Prominent trader Scott Melker claims that any sharp drop in BTCUSDSHORTS positions on Bitfinex will result in a spike in the spot price of Bitcoin, adding that he will be on the lookout for signs of a similar bullish reaction.
Bitfinex Whales could start cooling these shorts. Every time they lower the price, the price goes up. Will watch. pic.twitter.com/5F40LYjMVL
– The wolf of all streets (@scottmelker) July 16, 2021
A closer look at the BTCUSD-BTCUSDSHORTS correlation reveals an erratic reversible correlation. Bitfinex’s short positions started a bear run after December 2020, a time 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.
However, the same BTCUSDSHORTS crashed – at best – in June, keeping Bitcoin stable, if not entirely, above the psychological support of $ 30,000.
Downward pressure on Bitcoin remains despite the recent decline in BTCUSDShorts as well as the release of Grayscale Bitcoin Trust (GBTC) shares valued at 16,000 BTC on July 18 after a six-month lock-up period.
JPMorgan & Chase strategists, led by Nikolaos Panigirtzoglou, warned in June that Grayscale’s grand unlock event could become the source of the next wave of sales in the Bitcoin market.
Online 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, investors tend to deviate from the spot market.
“Investors now have more incentives for GBTC shares than BTC, which eases buying pressure on the BTC spot market somewhat,” said Woo. “It’s a downward trend.”
(1) the impact is more sudden and direct, while (2) the effect is very slow. So it’s an upward trend.
All long-term effects are neutral as all arbitrage activities balance each other out in time. What we are analyzing is a short-term imbalance between supply and demand that could affect prices.
– Willy Woo (@woonomic) July 6, 2021
Bitcoin holds 31,000 CZK
As the bullish BTCUSDSHORTS fell resulting in a pessimistic GBTC unlock event, the spot BTC / USD exchange rate held $ 31,000 as preliminary support.
BTC / USD repeatedly tested the $ 30,000 to $ 31,000 area for support before rebounding higher. Its maximum retracement was able to penetrate the USD 35,000 resistance. However, profit-taking sentiment dragged the pair back down to $ 30,000.
As a result, pessimistic sentiment towards Bitcoin among analysts is extremely high, below $ 30,000. For example, independent analyst Fomocap predicts that if the pair closes below $ 30,000, BTC / USD will drop to $ 20,000.
Weekly. Price declined from 39k. Then 35k. Continue to press down with higher pressure. Below the intermediate channel. Breaking below 30k is definitely supported by 20k. This is how gravity works. But still holds up until now .. #Bitcoin pic.twitter.com/2qpKWGL4cF
– Fomocap (@Workedia) July 16, 2021
NebraskanGooner also expects a “nuclear” scenario for Bitcoin if it falls below $ 30,000.
Everyone is talking about the $ 30,000 level.
As far as concerned, this is the support that should be kept to avoid kernels. pic.twitter.com/t4Vv2msdAw
– NebraskanGooner (@nebraskangooner) July 14, 2021
The formation of a potential inverse 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.
Woo relies on the chain’s fundamentals to predict a bullish outcome. The analyst says that smart money has stopped selling as long-term investors absorb bitcoin at its peak as the price hits the $ 30,000 support level.
“Coins are moving from speculators to long-term (die-hard) investors at a rate not seen since February when the price rose from $ 30,000 to $ 56,000,” he wrote in his most recent statement to clients:
“I expect price to break out of the bearish sideways band next week, followed by a rebound towards the $ 50,000- $ 60,000 region before further consolidation.”