The close of the day above $30,000, which we are again below at the time of writing, could be a sign that Bitcoin is ready to consolidate. This means that the price has already reached the bottom and can continue to build from here. Nobody knows for sure what we can expect from Bitcoin in the coming days. But we found some analysts who have something to say about it.
There’s a short squeeze in the air
The derivatives market is always an interesting place to see how the professional traders currently stand in the market. As we can see from Coinalyze’s chart below, a lot of shorts have opened during Bitcoin’s recent fall. The ratio between long and short positions has increased significantly in favor of the shorts.
That means that relatively many professional traders are short at the moment. Going short means that you borrow a Bitcoin and then immediately sell it. With this you bet on a lower price, because you have to repay that Bitcoin in the future to repay the loan. The risk for people who go short is that the price will rise.
If the price rises too much, the trading platform may call you and say that you do not have enough funds to cover your short position. In that case, you will have to send more money to the platform or have yourself liquidated. If many short positions are liquidated at the same time, it means a huge buying wave for Bitcoin, which could put other short positions at risk as well. We call that a short squeeze.