Bitcoin (BTC) Heavily Shorted on BitMEX, Here's Where This Might Lead

According to on-chain analytics firm Santiment, Bitcoin is being heavily shorted on BitMEX, with massive bets against its price.

Santiment observes that Bitcoin's funding rate on BitMEX, a leading cryptocurrency derivatives exchange, is seeing its most negative ratio.

😮 #Bitcoin's funding rate on @BitMEX is seeing its most negative ratio since the heavy bets against prices in mid-March, just before prices soared. Generally, price rise probabilities increase when the crowd overwhelmingly assumes prices will be dropping. https://t.co/HbTcSouRsU pic.twitter.com/bu1dNDFTcU

— Santiment (@santimentfeed) May 10, 2023

The previous instance in which heavy bets against the BTC price were recorded was in mid-March, and the Bitcoin price jumped 31% afterward.

According to Santiment analysts, prices are more likely to rise when the crowd overwhelmingly assumes they will be dropping. This is because the previously outlined scenario frequently increases the likelihood of a short squeeze.

A rally that results from traders covering their bearish short bets is referred to as a "short squeeze." In other words, the strong buying pressure "squeezes" the short sellers out of the market.

As investors awaited the most recent U.S. inflation report on Wednesday, Bitcoin (BTC) fluctuated sideways at about $27,000. According to data from CoinMarketCap, at the time of writing, the lead cryptocurrency was trading at $27,560, down 0.29% over the previous day.

Investors will be keeping an eye on the CPI release for hints regarding the U.S. Federal Reserve's decision-making process at its next policy meeting in June. The Federal Funds rate was raised by 25 basis points (bps) earlier this month, making it the highest it has been in 16 years.

On-chain situation for BTC

In a recent tweet, on-chain analytics firm IntoTheBlock took a closer look at the on-chain situation for BTC.

It notes that there has not been a lot of historic demand below the current price level until around $24,000. This might suggest that the BTC price may not have strong buying support in a further downward move below current levels.
 
On the other hand, stronger buying is seen in the ranges leading up to 30K, which aligns with on-chain indicators pointing to long-term holders not selling at these levels.

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IntoTheBlock analysts suggest that these points could indicate additional buying pressure if the price recovers to the upside rather than forming resistance on a move up.

Meanwhile, the percentage of Bitcoin holders in profit has decreased over the past month, currently at 64.98%, which is the lowest point since March. The silver lining here is that similar drops in holders in profit this year have been relatively short-lived due to increased buying pressure.