Funds in Short Positions on Bitcoin Drop to 6-Month Low

The amount of money allocated to short bets against bitcoin fell to a more than 6-month low today.

Feb 19, 2019 at 7:44 p.m. UTC
Updated Sep 13, 2021 at 8:54 a.m. UTC

The amount of money allocated to short bets against bitcoin fell to a more than 6-month low during Tuesday’s trading session, data from the popular cryptocurrency trading platform Bitfinex reveals.

At 13:00 UTC today, the total funding in BTC shorts, or positions that would profit from a decline in the price of the underlying bitcoin asset, fell beyond the recent low of 18,992 BTC set this past November to reach 18,888 BTC - the lowest amount seen since Aug. 4, 2018.

The development comes a day after bitcoin’s price increased 8 percent, which likely trapped investors with a bearish outlook on the wrong side of the market, causing them to cover a large number of short positions.

Current figures show a 28 percent drop in the amount of funds in bitcoin shorts since the beginning of the day yesterday.

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Interestingly, bullish bets on Bitfinex, known as “longs,” have also witnessed a sharp decline in the past 48 hours.

Data from Bitfinex further reveals the amount of BTC/USD longs have dropped by a similar 29 percent from yesterday’s high, which is likely a sign of investors are deleveraging, or taking profit after bitcoin’s near 18 percent price increase over the past 11 days.

As it stands, the ratio of long to short positions is 1.42 to 1, meaning there are 1.42 BTC in a long position per every 1 BTC is a short position on Bitfinex. The ratio is a slight decline from the most recent high of 1.54 to 1 set on Feb. 15.

As previous analysis from CoinDesk notes, an unusually high long/short ratio can be a sign of an impending "long squeeze," or rapid covering of long positions which increases the rate at which price declines. However, the current ratio of 1.42 is lower than both the ratio of 1.8 to 1 set in August and the all-time high ratio of 3.74 to 1 set in February of 2018.

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

Teddy-bear-ill image via Shutterstock; charts by TradingView

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