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Bitcoin (BTC) Funds Are Placing More Shorts, Will This Fuel A New Rally?

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Sun, 02/23/2020 - 15:06
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  • Data from researchers at Skew shows funds have been increasing short exposure throughout the past several weeks

Cover image via U.Today

Data from researchers at Skew shows funds have been increasing short exposure throughout the past several weeks as the bitcoin price surged past $9,000 to hit a yearly high at $10,500.

“Leveraged funds increasing short exposure week after week. Cash and carry strategies or outright shorts?” said Skew.

How this could add momentum to bitcoin entering March

Short-term movements in the cryptocurrency market are typically swayed by short and long contract liquidations.

During a short squeeze, sellers that expect the bitcoin price to go down begin to panic close or adjust their positions if the bitcoin price starts to go up.

While liquidations on platforms like Bitfinex and CME are significantly lower than exchanges like BitMEX and Binance Futures that offer up to 125x leverage, an abrupt bitcoin spike still causes short sellers to control their positions.

When that happens, as seen with short squeezes in the equities market like with Tesla, it adds powerful short-term momentum to an asset.

It remains unclear whether the bitcoin short exposure on CME represents hedge positions by investors who also expect the bitcoin price to go up and hold a net long position.

For instance, many whales or individuals with large amounts of bitcoin like to place hedge shorts in an event the price of BTC corrects significantly in the near-term. But, the whales have net long positions in place.

Bitcoin short exposure by funds is on the rise
Source: Twitter

Considering that CME tailors to accredited and institutional investors rather than retail traders, it is highly likely that the majority of the short exposure are simply hedge positions against the market.

Even then, if the bitcoin price starts to show signs of a bullish market continuation by reclaiming the $10,500 yearly high, it could convert short positions to market buy orders in a squeeze, adding buying demand in the market.

The bitcoin price was at risk of a steep pullback as it dropped to as low as $9,350 on February 20. However, the dip was quickly bought up, prompting analysts to categorize it as a liquidity fill.

A heavy support level at $9,550 has been described as a key level that prevents BTC from seeing a sharp correction in the upcoming weeks if defended until weekly close.

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“Holding a similar EMA that held the market up during 2019. Another hidden bull div printing after $9500 S/R flip. Holding 50RSI on the daily Possible we test $9100-$9200 50EMA on the daily, but anything that holds and closes above $9670 is still bullish for me,” said highly regarded trader Jacob Canfield.

With less than 15 hours left to the weekly close, analysts are generally anticipating the support to hold. Above $9,550, key resistance levels exist at $10,300 and $10,900, two levels that rejected bitcoin many times throughout the past two years.

About the author

Joseph Young is an analyst based in South Korea that has been covering finance, fintech, and cryptocurrency since 2013. He has worked with various recognized publications in both the finance and cryptocurrency industries.

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COVID-19 Crisis Ruins Bitcoin's Q1, but Bulls Could Soon Have Massive Comeback

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Tue, 03/31/2020 - 19:25
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  • Bitcoin (BTC) bulls have high hopes for Q2 after the coronavirus-induced crisis tanked the price of the leading cryptocurrency

Cover image via stock.adobe.com
Contents

Bitcoin, the number one cryptocurrency by market capitalization, is set to finish its tumultuous first quarter of 2020 in the red with a 10.65 percent drop, according to crypto data provided by Skew.    

As reported by U.Today, it suffered a price crash of enormous magnitude due to the coronavirus pandemic that resulted in the global economic shock. 

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The stellar quarter that wasn't 

In early 2020, Bitcoin was on track to have its best Q1 since 2013. In fact, it gained more than 50 percent after reaching its current yearly high of $10,508 on Feb. 13. However, this rally hit a snag and BTC printed its first negative February close in six years

All bull dreams have been brutally shattered after the 'Black Thursday' of May 12. On top of halving its price in less than one day, BTC was actually in great danger of hitting zero because of a string of liquidations on BitMEX. 

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The odds are in the bulls' favor  

That said, there is still a good chance that the bulls can stage an impressive comeback in Q2, which is historically the most successful quarter for the leading cryptocurrency.

Last year, BTC kicked off its impressive rally on Apr. 2 with a sudden 20 percent price pump.   

At press time, BTC is sitting at $6,480, continuing its streak of range-bound price action.  

About the author

Alex Dovbnya (aka AlexMorris) is a cryptocurrency expert, trader and journalist with extensive experience of covering everything related to the burgeoning industry — from price analysis to Blockchain disruption. Alex authored more than 1,000 stories for U.Today, CryptoComes and other fintech media outlets. He’s particularly interested in regulatory trends around the globe that are shaping the future of digital assets.

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