Has Bitcoin bottomed? What an interesting time for cryptocurrency.
For many people, the cryptocurrency markets are still to be avoided but sentiment seems to be shifting this week. After all, bearish movement on bitcoin dropped to a three-month low today in conjunction with the reduced number of shorts on the exchange Bitfinex.
As you may know, that’s the lowest number of shorts since August 5th.
Has Bitcoin Bottomed for 2018?
Historically, this was one of the tightest two weeks for the price of Bitcoin with a sustained period of sideways trading. However, the number of shorts dropped below 22k yesterday which is almost 35% in just one week. Furthermore, the number of long positions has surged by 9% during this same period giving way to a much more bullish sentiment.
In case you might be asking yourself, a short position is when someone sells their Bitcoin with the expectation that the price will drop and they can buy it back later. On the other hand, a long position is when a trader buys Bitcoin with the expectation that the price will rise.
Anyway, Bitcoin has risen 4% since these lows to transition into more bullish territory. As if that’s not enough, this is often the most explosive time of year for cryptocurrency markets and this is most especially true of the month of November. In fact, Bitcoin has only lost value in the month of November on two occasions, 2010 and 2011.
Can Bitcoin Continue to Rise
When you have too many shorts or too many longs, this is when traders refer to the market as being over sold or overbought. For this reason, we have a “short squeeze” which is when too many shorts lead traders to cover and this results in a quick increase in price.
Needless to say, this can also happen the other way around, with longs. If there are too many long positions, the markets are oversold and this can result in a sharp drop for the price of Bitcoin.
But what does this mean for the price of Bitcoin?
Well, as of this morning, the number of long positions on Bitfinex exceed the number of short positions by 3 percent. Hence, sentiment is certainly turning more bullish with the shorts reaching three month lows.
And has Bitcoin finally bottomed for the year?
Well, we have just crossed over to this bullish territory and with so much uncertainty in recent months, we must continue to wait for the markets to establish a clear direction.
Writers Disclosure: Derek Cullen is not a financial analyst and the above article was written based on views and opinions on Trading View. He is a cryptocurrency writer who creates interesting content for small businesses and cryptocurrency websites. You can hire Derek to write for your website here on Deadly Content.