Bitfinex shorts crumble, bears capitulate after Bitcoin holds above $30K

Bitcoin breached the $30K mark today, and although that may seem like a small milestone, it’s actually a big deal for the cryptocurrency. Bitcoin is no longer an asset class. It’s a currency, and it’s the first asset to have done so since gold did the same back in 2008.

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Bitcoin price held above $3K today, but failed to make new highs and there was a lot of short selling that failed to make enough profit, as traders sold short to make a profit. There was also a lot of selling from the bears, who tried to buy back in to take a profit, but stopped when they realised they were the one holding the bag if Bitcoin doesn’t make new highs to $3.2K and above.

After a wild week of Bitcoin volatility, and traders scrambling to unload their Bitcoin short positions, the bears have begun to capitulate. The digital currency was hovering at $30,000 this morning, and as traders continue to struggle to close out their positions, there is now a general sentiment of “let’s just see what happens”.. Read more about when was bitcoin at its lowest and let us know what you think.

The 25th. In June, the number of bitcoin (BTC) short margin positions on the Bitfinex exchange increased by 22,000, accounting for the equivalent of $726 million. At the time, Cointelegraph reported that at 9am GMT, there was a significant increase in Bitfinex’s spot volume market share, which matched demand on the short edge.

The data confirms that one (or more) whales actively supported the market and gambled on lower prices. The average price of the transaction was approximately $33,000, so each $500 difference would have resulted in an $11 million gain or loss if the short position had been closed.

Related: Why bitcoins upcoming breach doesn’t necessarily usher in an altcoin season

In the world of cryptocurrencies, traders tend to believe that an organization or group can create such a large position that there must be insider information protecting the position. But, as Cointelegraph previously discovered, Bitfinex’s margin shorts have been slashed since early June, when bitcoin launched on the 16th. June reached $40,400, undervalued by $65 million.

Bitcoinprice on Coinbase, in USD (left) versus BTC margin short sale on Bitfinex (right). Source: TradingView

A key difference between margin trading and futures (open or quarterly) is that margin traders can use their own bitcoins to close the transaction. So instead of buying in the market, you simply tell the exchange that you want to use your money to cover the short position.

This option is not available in the futures markets because the contracts are synthetic. Placing 10 bitcoins on the exchange does not exempt the short seller from collecting contracts worth $360,000.

Thus the short position could have been closed even if Bitfinex’s spot volume had been greater than the $900 million raised during the 8-hour period on June 25. were not fully accounted for.

Global bitcoin cash trading volume. Source: Coincide

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Once again, the short margin position was closed amid a sharp rise in spot volume on Bitfinex on the 27th. June closed. Therefore, it is reasonable to assume that the entities conducting the margin transaction have not previously purchased bitcoins to cover them.

The average price, as in the short margins on 22,000 bitcoins over a 20-hour period from the afternoon of the 26th, was the same as the average price on the previous day. June, were closed, was $32,500. These figures indicate a potential gross profit of $11 million for the trade. However, it should be noted that bitcoin was launched on the 26th. June peaked at $32,700, resulting in short-term losses of $15.4 million for short sellers.

These traders could have closed their positions when bitcoin tested the $31,500 support level, but the price showed resilience and that could have wiped out many of the gains from the trade. Whatever caused the short positions to close, it suggests bearish weakness or significant discomfort in holding bearish positions below $35,000.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Cointelegraph. Every investment and every stage of trading involves risk. You should do your own research before making a decision.

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