According to Santiment, the number of short positions in the crypto market is increasing after last night’s violent crash. However, the blockchain analysis platform is also Opinion that this offers opportunities for them cops from the market.
🧐 Traders are now closing short sales #crypto Market capitalizations continue their downward trend. When the crowd starts betting against markets, the probability increases #liquidations, causing prices to rise. For many #bullish Investors out there, this is the signal many are waiting for. pic.twitter.com/JiKqUBruMn
— Santiment (@santimentfeed) August 16, 2023
Falling price, rising short positions
The falling price of practically every crypto coin in the entire market has changed the positive mood of many investors and therefore the number of short positions has doubled. With a short position, the trader is betting on a further decline in the price, and such a position is often accompanied by it leverage. However, this also increases the likelihood of liquidations. Liquidation is the process by which an investor is forced to sell their cryptos (or other assets), often because the trader cannot meet the maintenance margin or cannot meet the terms of the contract. For short positions, this means they are forced to buy to close their position. This surge in buy orders may result in increased demand. As a result, the price of cryptocurrencies like Bitcoin (BTC) could increase.
Another analytics firm, CryptoQuant, has noticed a rapid increase in open interest in Ethereum over the past few days. Open Interest represents the total number of long or short positions that have not yet been executed or closed. A rise or fall in open interest indicates new or closing activity in the market. It is an indicator commonly used to measure market activity and sentiment. Historically, this number has been found to increase when crypto prices fall, meaning short traders are opening positions.
Bitcoin and altcoins are collapsing
The entire crypto market turned negative yesterday. Bitcoin price has even reached it low in months after a decline of 7.5%. Another big loser was XRP in particular, which doubled in price on July 13 as the US made partial gains Securities and Exchange Commission (SEC) was announced has since fallen nearly 13.5% in the 24-hour period. Shiba Inu (SHIB) also saw one sharp waste up nearly 10% after a hugely disappointing release from him layer 2 Network Shibarium.