Bitcoin price will rebound? After a record surge, Bitfinex’s BTC short positions fell by 25%

Bitcoin (Bitcoin) Short positions should be aware of potential blows, as the number of margin short positions on the Bitfinex exchange plummeted by approximately 25%.

As of 12:20 GMT on Saturday, the data set dropped to 11,066 BTC, compared to 14,897 BTC at the opening. At the same time, the decline is part of a larger downtrend that began on July 15. On that day, the total number of margin short positions reached 17,053 BTC.

As part of the general downward correction, BTCUSDSHORTS plummeted on July 17. Source: TradingView

To put it simply, BTCUSDSHORTS represents the number of Bitfinex’s margin put forward positions, in BTC. Traders borrow funds from their broker Bitfinex to bet on the bearish outcome of the BTC/USD instrument. In other words, the latest data shows that traders have reduced their leveraged short exposure in the Bitcoin market.

Bitcoin soaring expectations?

Popular trader Scott Melker claimed that every sharp drop in Bitfinex’s BTCUSDSHORTS position would lead to an increase in the spot price of Bitcoin, adding that he would pay close attention to whether a similar bullish reaction would occur in the market.

Carefully observe the correlation between BTCUSD-BTCUSDSHORTS and found an unstable positive correlation. Bitfinex’s short position entered a bear market after December 2020, which coincided with the soaring Bitcoin spot and derivatives markets.

From April to May, Bitfinex’s short position decreased, and the price of Bitcoin soared from below US$45,000 to a record high of US$65,000.

The correlation between recent Bitcoin spot prices and their short margin positions on Bitfinex. Source: TradingView

Nonetheless, the similar BTCUSDSHORTS crash in June—at best—stabilized Bitcoin above the psychological support of $30,000, if not directly pushed it higher.

Gray FUD

Despite the recent decline in BTCUSDShorts, downward pressure on Bitcoin still exists because Grayscale Investment unlocked 16,000 BTC worth of Grayscale Bitcoin Trust (GBTC) shares on July 18 after a 6-month lock-up period.

JPMorgan Chase strategist led by Nikolaos Panigirtzoglou caveat In June, the large-scale unlocking event of Grayscale may become the source of the next wave of selling in the Bitcoin market.

On-chain analyst Willy Woo echoed Similar concerns last weekExplain that when the GBTC premium drops relative to the Bitcoin units held in the Gray Reserve, it tends to divert investors’ attention from the spot market.

“Investors are now more motivated to buy GBTC shares instead of BTC, which has transferred some of the buying pressure from the BTC spot market,” Woo said. “This is bearish.”

Bitcoin holds 31,000 USD

As the optimistic decline in BTCUSDSHORTS offset the pessimistic GBTC unlock event, the BTC/USD spot exchange rate held 31,000 US dollars as its temporary support.

BTC/USD repeatedly tested the range of $30,000-31,000 as support before rebounding higher. Its maximum retracement has been able to break through the resistance level of 35,000 USD. Nevertheless, profit-taking sentiment pushed the currency pair back to 30,000 USD.

Therefore, analysts’ bearish sentiment on Bitcoin is very high, below $30,000. For example, Fomocap, an anonymous chart expert, believes that if the currency pair closes below 30,000 USD, BTC/USD will fall to 20,000 USD.

NebraskanGooner also predicts that if Bitcoin falls below US$30,000, there will be a “nuclear bomb” scenario.

As shown in the figure below, the formation of a potential inverted cup shape and a handle shape also causes Bitcoin to fall below $20,000 in the next drop below the range of $30,000 to $31,000.

The inverted cup handle pattern on the Bitcoin chart. Source: TradingView

Woo relies on on-chain fundamentals to predict bullish outcomes. The analyst said that smart currencies have stopped selling, and long-term investors have been absorbing Bitcoin at the highest level, as if the price was oscillating at the support level of $30,000.

The net flow of spot transactions is a 2-week moving average.Source: Willy Woo Newsletter

“The token is turning from speculators to long-term investors (strong hands) at a rate that has not been seen since the price rose from $30,000 to $56,000 in February,” he said Wrote in his recent notes To customers, add:

“I expect the price to break out of a bearish sideways range in the coming week and then return to the $50,000 to $60,000 area before further consolidation.”

The views and opinions expressed here only represent the views of the author and do not necessarily reflect the views of Every investment and trading action involves risk, and you should conduct your own research when making a decision.