Bitcoin (BTC) bulls should prepare for a possible bear attack as Bitfinex’s marginal shorts skyrocketed by just over 378%.
Most known for the BTCUSD shorts ticker, the record records the number of declining positions in the Bitcoin market. In simple terms, Traders borrow money from Bitfinex – their broker – to trade bets on bearish outcomes for the BTC / USD instrument. In the meantime, the value of open short positions is measured in BTC.
The number of marginal short positions on Bitfinex hit an intraday high of 6,468.2202 BTC this Monday.which is more than 378% up from the previous session’s low of 1,351.72 BTC.
The rally caused some analysts to sound the alarm about a possible price drop on the Bitcoin spot market., largely because a similar and wilder uptrend in the BTCUSD pair earlier last month had the BTC / USD pair plummeting nearly $ 13,000 on May 19th.
For example, the independent market researcher Fomocap tweeted a graph showing a visible correlation between Bitcoin’s spot prices and its marginal short positions. The analyst highlighted two cases to indicate that two metrics were moving inversely with some lag.
His first example showed that on May 25th, the BTCUSD shorts fell, which later led to a price rally in the Bitcoin spot markets.
The second example showed the crash in Bitcoin spot prices after a surge in BTCUSD shorts.
EBlockChain, a contribution to TradingView, said Monday that BTCUSD shorts of over 200% are a “strong indicator” of an impending decline in Bitcoin spot markets.. The analyst added:
“It could be unleashed in [cuestión] a few hours [a] a maximum of three days. “
Long positions now
The overtly bearish statements for Bitcoin also came as its marginal long positions steadily increased.
BTCUSD Longs, another Bitfinex record that tracks the number of bullish margin positions, rose to 44,538.6579 BTC on Monday.. Apparently, the long exposure of Bitcoin remained greater than the total short exposure, which shows that for traders the direction of least risk was up.
However, a sudden drop in bitcoin spot prices could also cause leveraged long holders to abandon their positions in BTCUSD, which in turn leads to further sales. Such an event is called “long press”. For example, the May 19 drop in prices had liquidated around $ 7.5 billion in leveraged long positions across the crypto derivatives market.
Jacob Canfield, a cryptocurrency trader, offered an optimistic outlook for Bitcoin after the May crash. Last week, the analyst claimed that Bitcoin has already fallen more than 40% after the long squeeze in May, and now there is less chance of another significant downward move.
After a long press, the liquidity will be taken down.
Liquidity is usually steered up and shorts remain caught in the assumption that more downtrends are to come.
We already have a 40% drop.
Now it is the bears’ turn to straighten themselves.
-Jacob Canfield (@JacobCanfield) June 2, 2021
Meanwhile, the cost of funding long positions in the bitcoin derivatives market remained largely below zero after the May 19 crash.. Negative funding rates result in bearish traders paying commissions every eight hours. The situation encourages market makers and arbitration boards to buy reverse swaps – or perpetual contracts – while discharging their monthly futures contracts.
Analysts often interpret negative financing rates as a buying indicator because they create incentives for buyers and urge sellers to sell short.. In the meantime, when the short positions close their positions, the funding rates become neutral.
Technical data disappoint
Bitcoin’s ongoing consolidation move has many traders pointing out the possible formation of a bearish pennant structure.
Not a huge fan of this structure. $ BTC pic.twitter.com/yO8bG66Zzr
– Blackbeard (@crypto_blkbeard) June 7, 2021
In hindsight, bearish pennants are indicators of a bearish continuation, that is, their configuration usually implies that the asset is breaking the range and moving in the direction of its previous trend. For example, Bitcoin fell from around $ 65,000 to $ 30,000 before it made the pennant. Therefore, the probability of a further decline appears to be higher solely due to the technical structures.
Meanwhile, the bullish support for Bitcoin remains the fear of higher inflation. This week the US Bureau of Labor Statistics released the Consumer Price Index (CPI) report for May. The data will set the future tone for the Fed’s expansionary monetary policy, including near-zero interest rates and endless bond-buying programs.
Economists expect the CPI to rise to 4.7% in May, up from 4.2% in April.
On-chain metrics are bullish
There is more evidence of investors’ intent to hold Bitcoin than to trade / liquidate it for any other asset. For example, On-chain analytics firm Glassnode reported a decline in Bitcoin-related net flows.
Meanwhile, rival CryptoQuant pointed to a significant drop in volume across the Bitcoin blockchain network. suggest a similar retention outlook through their BTC: Active Address Count metric.
The views and opinions expressed are those of the author only and do not necessarily reflect the views of Cointelegraph. Every investment and trade movement carries risks. When making a decision, you should do your own research.