The Number of Bitcoin Short Positions Just Hit a 3-Month Low

Short positions placed on bitcoin have fallen to their lowest levels since the beginning of August as market sentiment shifts in favor of the bulls.

AccessTimeIconNov 6, 2018 at 3:45 p.m. UTC
Updated Aug 18, 2021 at 10:10 p.m. UTC

Presented By Icon

Election 2024 coverage presented by

Stand with crypto

The bearish sentiment around bitcoin sank to three-month lows earlier today as short positions placed on crypto exchange Bitfinex fell to their lowest level since August 5th.

At approximately 11:00 UTC, the number of short positions dropped to 21,434, which represents a 33 percent drop in the past eight days alone. During the same time, longs – or positions that are betting on an increase in bitcoin's price – also witnessed a notable increase of 10 percent, the current number of which (24,410) marks a three-week high.

  • Bitcoin Mining in the U.S. Will Become 'a Lot More Decentralized': Core Scientific CEO
    13:18
    Bitcoin Mining in the U.S. Will Become 'a Lot More Decentralized': Core Scientific CEO
  • Binance to Discontinue Its Nigerian Naira Services After Government Scrutiny
    05:10
    Binance to Discontinue Its Nigerian Naira Services After Government Scrutiny
  • The first video of the year 2024
    04:07
    The first video of the year 2024
  • The last regression video of the year 3.67.0
    40:07
    The last regression video of the year 3.67.0
  • Indeed, the sentiment here seems to be shifting in favor of the bulls. The price of bitcoin broke bearish from a historically tight, two-week range of just $139 on Oct. 29, yet sellers were not able to further capitalize on the bearish outcome.

    As a result, the price of bitcoin has risen roughly 4 percent since then to return to the range and negate the technically bearish view in the short term.

    What's more, bitcoin bulls have market seasonality on their side. The fourth quarter of the fiscal year is traditionally bullish for bitcoin prices, specifically the month of November. Data reveals that bitcoin has only concluded November with a monthly percent loss once since 2010, in 2011.

    Looking at the chart below, it's perhaps no coincidence that shorts began their more-than-30 percent drop just a day before November began.

    BTC/USD Longs, Shorts, and Price

    When a short or long trade becomes overcrowded, it tends to represent overbought or oversold market conditions. For example, a short squeeze, or rapid price increase occurs when an abundance of shorts are forced to cover in order to avoid a losing trading.

    The same can occur for longs, too. If there are an abundance of longs and price begins to fall, those longing will likely need to close their trade and as result drive the price of the underlying asset lower and faster.

    Although BTC shorts have taken a hit as of late, an abundance of longs has yet to pile up. Data shows only 53 percent of the leverage positions on Bitfinex are longs, meaning 47 percent are shorts.

    The relatively even ratio shows longs are not yet an overwhelming favorite, but it's worth keeping in mind that the higher the percentage of longs, the more likely the price of bitcoin is to experience a pullback in the near term due to the overbought market conditions it would create, as was witnessed at the beginning of September.

    Disclosure: The author holds BTC, AST, REQ, OMG, FUEL, 1st and AMP at the time of writing.

    Bear hiding image via Shutterstock

    Disclosure

    Please note that our privacy policy, terms of use, cookies, and do not sell my personal information have been updated.

    CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. CoinDesk has adopted a set of principles aimed at ensuring the integrity, editorial independence and freedom from bias of its publications. CoinDesk is part of the Bullish group, which owns and invests in digital asset businesses and digital assets. CoinDesk employees, including journalists, may receive Bullish group equity-based compensation. Bullish was incubated by technology investor Block.one.


    Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.