As Bitfinex margin short positions soared by 378%, short positions hit Bitcoin market sentiment


Bitcoin (Bitcoin) Bulls should be prepared for the potential shock of shorts, as Bitfinex’s margin short positions jumped by more than 378%.

The most widely known stock symbol is BTCUSD Shorts. This data set records the number of bearish positions in the Bitcoin market. In simple terms, traders borrow funds from their broker Bitfinex to bet on the bearish outcome of the BTC/USD instrument. At the same time, the value of short positions is measured in BTC.

On Monday, Bitfinex’s margin short position reached an intraday high of 6,468.2202 BTC, an increase of more than 378% from the previous trading day’s low of 1,351.72 BTC.

This surge prompted some analysts to warn about a potential price collapse in the Bitcoin spot market, mainly because a similar BTCUSD short-term upward trend at the beginning of last month caused the BTC/USD exchange rate to drop by nearly $13,000 on May 19th.

For example, Fomocap, an independent market research organization Tweet A graph shows a clear correlation between the Bitcoin spot exchange rate and its short margin position. The analyst highlighted two examples, pointing out that the two indicators move backwards with a certain lag.

His first example shows that on May 25, BTCUSD fell short, which is Which later led to a price rebound In the Bitcoin spot market.

After Bitfinex’s short BTCUSD position increased, Bitcoin plummeted by 30%. Source: TradingView

The second example shows that the spot price of Bitcoin plummeted after a spike in BTCUSD short positions.

EBlockChain, TradingView contributor, Say Earlier Monday, BTCUSD short positions of more than 200% and above were a “strong sign” of the imminent sell-off in the Bitcoin spot market. The analyst added:

“It can be in a [matter] a couple of hours [to] Up to three days. “

At the same time, long positions

The bold bearish statement on Bitcoin has also been accompanied by a steady rise in its long margin position.

BTCUSD longs, another Bitfinex data set that records the number of bullish margin positions, soared to 44,538.6579 BTC on Monday. Therefore, the long position of Bitcoin is still higher than the short position in general, which shows that for traders, the least risky direction is the upside.

Despite the recent surge in bearish positions, Bitcoin’s long position on Bitfinex is still high. Source: TradingView

But the sudden drop in the spot price of Bitcoin may also cause leveraged long holders to sell their BTCUSD positions, which in turn will trigger further selling. Such events are called “Long squeeze. “For example, the price collapse on May 19 has liquidated a long leveraged position of approximately US$7.5 billion in the entire cryptocurrency derivatives market.

Cryptocurrency trader Jacob Canfield provided an optimistic outlook for Bitcoin after the crash in May. Last week, the analyst stated that Bitcoin has fallen by more than 40% after a prolonged squeeze in May-now it is less likely to face another major bearish trend.

At the same time, after the crash on May 19, the cost of funding for long positions in the Bitcoin derivatives market remained mostly below zero. Negative funding rates cause bearish traders to pay fees every eight hours. This situation encourages market makers and arbitrage trading desks to purchase reverse swaps or perpetual contracts because they also unload monthly futures contracts.

BTC financing interest rate history. Source: Bybt.com

Analysts usually interpret negative financing rates as buying indicators because they create incentives for buyers and squeeze short sellers. At the same time, once the short position is closed, the funding interest rate will become neutral.

Technology disappointing

The continued integration of Bitcoin has led many traders to point out the possibility Form a bearish pennant Structure.

In retrospect, bearish pennants are downward continuity indicators—that is, their setting usually involves an asset breaking through the range and continuing to move in the direction of the previous trend. For example, before the pennant was formed, Bitcoin fell from approximately $65,000 to $30,000. Therefore, based only on the technical structure, the possibility of its continued decline seems to be higher.

At the same time, a bullish support for Bitcoin still exists Concerns about rising inflationThis week, the US Bureau of Labor Statistics will release the Consumer Price Index (CPI) report for May. The data will set the tone for the Fed’s expansionary monetary policy, including near-zero loan interest rates and unlimited bond purchase plans.

Economists predict that the CPI in May will rise to 4.7% from 4.2% in April.

On-chain indicators are bullish

There is more evidence that investors intend to hold Bitcoin rather than trade/clear it in exchange for other assets. For example, on-chain analytics company Glassnode reported a drop in net transaction traffic involving Bitcoin.

Bitcoin exchange net traffic hit a 19-month low. Source: Glassnode

At the same time, its competitor CryptoQuant emphasized the significant decline in the transaction volume of the entire Bitcoin blockchain, implying similar holding prospects through its “BTC: Active Address Count” indicator.

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