Oustanding bitcoin shorts on Bitfinex have doubled in August
From 18,000BTC to 36,000. Clearly, at least some traders are expecting more pain.
The number of bitcoin short orders on Bitfinex have doubled since the start of August, from 18,000BTC on 1 August to more than 36,000BTC on 15 August, according to MarketWatch.
Many of those may have been prudent bets, with bitcoin prices generally running downwards throughout August.
The drops might be attributable to a range of factors, including the generally depressed market states and the rejection of several suddenly-hotly-anticipated bitcoin ETFs, while the increase in the number of outstanding shorts might be mostly due to it having so far been a generally correct bet through August.
The number of outstanding Bitfinex shorts is also a close match for bitcoin prices in general. The last time it had this many shorts was in mid-April, when prices were also slumping down from highs of over $11,000 in March.
With the market as a whole feeling a bearish brunt in recent weeks, it might be little surprise that more people are going short and betting on further drops.
Others are undoubtedly using the opportunity to buy instead, though. Contrarian indicators like the bitcoin misery index are popular-if-dubious mainstays, while other figures show that big money interest in bitcoin tends to grow whenever prices are running down. It's quite possible that the outstanding shorts are also largely composed of people buying bitcoin now while simultaneously hedging against further drops by betting on a slide.
But in this case in particular, technical indicators might have sparked a preference for shorting. After its brief mid-July rally, bitcoin experienced a technical failure at the 200-day moving average which might have been the only sign needed for some.
It's easy to see why many would be down to go short. With that in mind, a lot of shorting margin traders are getting themselves liquidated on BitMex right now and Tether has just fired up the printing press to deliver another few tens of millions to the market, which tends to be one of the safest signs of an upcoming rise. Some of those new shorts might end up disappointed.
Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VET, XLM, BTC, ADA