Bitcoin short positions have suddenly dropped to their yearly lows on cryptocurrency exchange Bitfinex. Interestingly enough, the drop was sudden, plummeting from 23,000 BTC open positions to below 17,000 open positions in a quick sudden drop. Meanwhile, long positions seem to be gaining momentum.
Bitcoin Shorts Reaching One Year Lows
Bitcoin short positions are opened when traders bet against the positive price. In other words, people tend to short Bitcoin when they believe the asset is about to decrease in its value.
Looking at the above chart shows us that after reaching a high at around 23,000 BTC of open positions, short positions suddenly plunged to around 17,000 in a matter of hours. The last time the value of opened short positions was so low was back in March 2018 – a little over a year ago.
When looking at short positions, it’s also important to monitor the opened long positions as their direct counterpart.
The chart displays the value of opened long positions in the last day. As it can be clearly monitored, their behavior is the exact opposite. They skyrocketed. Again, in just a few short hours, their value shot up from around 23,800 to more than $26,200 BTC of open positions.
Squeeze Behind The Corner?
While it’s always important to monitor all technical indicators, the correlation between short and long positions can also be a telltale sign.
Earlier in February, Cryptopotato reported on a similar occurrence. Back then, the number of short positions trimmed down by about 10 percent, while long positions were also gaining momentum.
When the amount of open shorts is low and the longs number is high, the market usually tends to go through the so-called long squeeze. On the other hand, when the amount of open shorts is high, unlike common sense, usually a short squeeze takes place.
A short squeeze is described as a situation in which a heavily shorted asset, in this case Bitcoin, moves sharply higher, which forces sellers to close their short positions and add to the upward pressure of the asset. That’s not the current case.
The current case is the exact opposite – the amount of opened short positions is low, while longs are high. That’s a market situation in which the price goes through a sudden drop and it incites further selling.
In addition, it’s worth noting that the price of Bitcoin has remained relatively steady. In the last 24 hours, the cryptocurrency has realized slight gains of about 1.8 percent. This is unexpected considering the short and longs sharp moves which took place earlier today.