Bitcoin shorts cascade 67% in 5 minutes, will this send BTC up or down?

01 Jul, 2019
by Will Heasman
Analysis
Bitcoin shorts cascade 67% in 5 minutes, will this send BTC up or down?

Yesterday, Bitcoin shorts cascaded down 67% in a matter of minutes marking the lowest number of short positions since January 2018, a time when Bitcoin was similarly cascading (in case you don’t remember); so what does this mean for current price action?

On June 30th at approximately 3:25pm (UTC) Bitcoin (BTC) shorts on Bitfinex were seen to plummet 67% a change from 30221, to 9739 shorts within the space of just 5 minutes; shortly before this event BTC decided to take a plunge, falling from around $11.5k to $10.9 in a similarly short space of time.

BTCUSDSHORTS chart provided by TradingView

Due to the volatility of the drop It can be surmised that this wasn’t a group working in coalition, but rather a lone investor. That’s approximately 220 million dollars’ worth of Bitcoin shorts closed by (presumably) one whale.

While at first glance this may seem bullish, the last time this happening occurred, back in May, when Bitcoin shorts dropped approximately 40%, Bitcoin similarly fell around 26% from a price of $8400 to $6200 shortly after.

BTC shorts in May 2019

BTCUSDSHORTS chart provided by TradingView

BTC/USD price in May 2019

 BTC/USD Chart provided by Tradingview

Community reactions are mixed, with some believing that this could be a good thing for BTC going forward, and others suggesting that we may see a repeat of price action back in May…

What actually happened?

One theory as to what happened was provided by Richard Heart -  a Bitcoin YouTuber and early investor - who suggested that the whale had a position open for 20,000 BTC short, which would end up losing around $20k for every dollar BTC rose; forcing the investor to close the short position, doing so without moving price by claiming the short position with existing BTC, negating the need to market buy in order to close.

Within a response in another thread discussing a similar theory, seemed to unearth the very transaction which provided the BTC to claim the short position:

What’s next?

It seems as though the usual benefits of a closed short position have been pretty much negated by the whale claiming its own position. However, this may only lead BTC one way… down.

That’s because currently, and thanks to the whale pulling his position, there are more long positions open then shorts, something which historically results in price going lower.

Right now long positions are at around 20,000, with shorts more than 10k below this at 9858 during the time of writing.

BTCUSDLONGS chart provided by TradingView

This could well indicate that Bitcoin is in for some more pain.

What do you think? Will Bitcoin continue to fall? Let us know your thoughts in the comments below!

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