As the Market Struggles, Bitcoin Hints at a Capitulation:

Key Takeaways:

  • The number of short Bitcoin positions has surged on Bitfinex.
  • Such market behavior has coincided with downward price action in the past.
  • Further selling pressure could push BTC below $ 34,400, triggering a capitulation event.

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Bitcoin has looked shaky for weeks, with many large investors favoring the downside. The increasing downward pressure could push BTC to break support and suffer a steep correction.

Bitcoin Spells Trouble:

Bitcoin continues to trade sideways while large investors appear to be betting on an upcoming capitulation event.

Data from Datamish shows that there has been a significant increase in the number of short Bitcoin positions taken out on Bitfinex. It appears that a group of large investors or institutions borrowed roughly 1,500 Bitcoin worth $ 58.5 million from the Hong Kong based cryptocurrency exchange with the expectation that prices will decrease in the near future.

A total of 4,982 Bitcoin have been lent on the exchange, and most of the short positions are non-hedging at the time of writing.

Bitcoin Short Positions:
Source: Datamish:

The sudden spike in short positions comes as Bitcoin faces consistent rejection from the 50-week moving average after weeks of testing the critical resistance barrier. Still, the top cryptocurrency appears to hold above a vital support area represented by the 100-week moving average at $ 34,400. A decisive close below this demand level could lead to a downturn for Bitcoin.

Based on the weekly chart, a decisive candlestick close below the 100-week moving average at $ 34,400 could have the potential to ignite panic selling among market participants. If this were to happen, Bitcoin would likely capitulate toward the 200-week moving average at around $ 20,000 to begin forming a market bottom.

Bitcoin Price Chart:
Source: TradingView:

The respected on-chain analyst Willy Woo has also said that he thinks that institutions and large holders have not stopped selling Bitcoin. He stated that a price crash could be imminent given that Bitcoin has historically endured capitulation events in previous bull markets. In a Mar. 10 Substack post, he wrote:

“There’s no question we are in a bear market due to the duration of the sell-off. There’s never been a bottom of a bear market in BTC without a capitulation event, so I think there is a high probability that this region breaks down, and we test lower lows before accumulation takes place to set up for the next bull cycle, ” said: Woo.

Bitcoin is currently trading at around $ 38,850. It’s about 43.4% short of its all-time high.

Disclosure: At the time of writing, the author of this piece owned BTC and ETH.

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