Key points to remember
- The number of Bitcoin short positions surged on Bitfinex.
- Such market behavior has coincided with downward price action in the past.
- Further selling pressure could push BTC below $34,400, triggering a capitulation event.
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Bitcoin has looked fragile for weeks, with many large investors favoring the decline. The growing downward pressure could push BTC to break the support and undergo a sharp correction.
Bitcoin spell problem
Bitcoin continues to trade sideways as large investors appear to be betting on an upcoming capitulation event.
Datamish Data shows that there has been a significant increase in the number of Bitcoin short positions taken on Bitfinex. It appears that a group of large investors or institutions have borrowed around 1,500 bitcoins worth $58.5 million from the Hong Kong-based cryptocurrency exchange in hopes that prices will decline in a near future.
A total of 4,982 Bitcoins have been loaned out on the exchange, and most of the short positions are unhedged at the time of writing.
The sudden spike in short positions comes as Bitcoin faces a steady rejection from the 50-week moving average after weeks of testing the critical resistance barrier. Still, the major cryptocurrency appears to be holding above a vital support zone represented by the 100-week moving average at $34,400. A decisive close below this level of demand could lead to a slowdown in Bitcoin.
Based on the weekly chart, a decisive candlestick near the 100-week moving average at $34,400 could have the potential to trigger panic selling among market participants. If that were to happen, Bitcoin would likely capitulate towards the 200-week moving average at around $20,000 to start forming a market bottom.
Respected on-chain analyst Willy Woo also said he believes institutions and large holders haven’t stopped selling Bitcoin. He said a price crash could be imminent given that Bitcoin has historically suffered capitulation events in previous bull markets. In a March 10 Substack post, he wrote:
“There is no doubt that we are in a bear market due to the duration of the liquidation. There has never been a bear market low in BTC without a capitulation event, so I think there is a high probability that this region will break down, and we are testing lower lows before the accumulation n takes place to prepare for the next bullish cycle”, noted Courting.
Bitcoin is currently trading at around $38,850. That’s about 43.4% less than its all-time high.
Disclosure: At the time of writing this article, the author of this article owned BTC and ETH.
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