Curious why Bitcoin just jumped $1,200 in less than an hour?

in bitcoin •  5 months ago

Be curious no longer!

For a good explanation as to why Bitcoin just jumped bigly in a very short amount of time, take a look at the chart below provided yesterday by our very own @techwizardry:

(Source: https://www.reddit.com/r/CryptoCurrency/comments/8bj5fy/margin_shorts_on_bitfinex_are_now_higher_than/)

Do you see the interesting part?

Take a look at the second graph, the one that shows the "Margin Shorts" of Bitcoin on Bitfinex.

As of yesterday, those climbed to 38k, which is higher than it has been at any other point on the chart, and one of the highest levels it has been, well, ever.

Why this is interesting:

This is a very interesting development considering prices were basically on or near the lows.

Usually, when short positions build up, it happens at high points, not low points.

The fact that it is at this level AFTER bitcoin has already fallen some 70% leads me to believe that they are about to get taken to the woodshed.

That is exactly what is already happening today.

Check out the price of bitcoin today:

Anytime you have a large number of traders on the same side of trade, prices often do exactly the opposite.

Plus a large short position is basically a built in buy position, especially when it is being done on margin.

Others seeing similar things:

Brendan Playford, the CEO of Constellation also noted an increase in the build of short positions over the past few weeks.

"Over the past two weeks there has been a steady increase in short positions with people betting against the price of bitcoin."

“Further, the long/short ratio on bitcoin hit a record low of 0.80 and started to recover."

(Source: https://www.marketwatch.com/story/is-bitcoins-biggest-gain-in-2-months-a-short-squeeze-or-a-change-in-sentiment-2018-04-12?link=MW_latest_news)

Nick Kirk, a quantitative developer at Cypher Capital echoed similar comments to CNBC this morning, saying:

"The ratio of short margin trades versus longs has been increasing recently."

"Buying volume ticked up today and a lot of these short trades got liquidated, helping fuel the rally."

(Source: https://www.cnbc.com/2018/04/12/bitcoin-surges-10-percent-in-sudden-move-to-above-7500.html)

Why use margin?

Margin is interesting because it offers traders and investors a way to leverage their positions.

In the case of Bitfinex, by using margin, traders are basically allowed to use the positions other investors have sitting on the exchange available for lending.

If say you have $10,000 on the exchange and you wanted to short BTC you could only short $10,000 worth. Which means if the price dropped 10%, you would make roughly $1k.

However, if you had something like 5 to 1 margin and made that same trade. When BTC dropped 10%, instead of you making $1k, you would make $5k as the margin effectively let you 5X the size of your trade.

Keep in mind that it works in the opposite direction too, meaning if you are on 5X margin you can lose your money 5X as fast as well.

Stay informed my friends and squeeze those margin shorts!

*Special thanks to @techwizardry for sharing his chart

Follow me: @jrcornel

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@JrCornel, thanks for giving me props! I should have posted the 1-hour chart as it showed the large gap between the shorts and the longs a lot better.

cKIiLBi

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You got it. Good stuff by the way. Thanks for bringing it to my attention!

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@TechWizdardry... Thank You for Your Posts.

Following You now...

Cheers !!

Great read - very informative. Though worth noting you can't actually short (or go long!) without margin - only sell and buy!

Very nice. I have always noticed that markets tend to go in the direction that reks the most people. This short rektage is becoming an epic one! hehe . regards @jrcornel!

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Very astute observation. I have noticed that as well.

I always look to see what the BTC/KRW pair is doing in times like these! ;)

Have to wonder then, why regardless of the up or down shift, a crypto miner like MGTi is only trading at $1.28.

Seems to me that ultimately secure bitcoin miners with offline cold storage will become smart investments. But, as we know, the main stream media has people thinking crypto is a flash-in-the-pan type of thing. And MSM also seems to be very snarky towards MGTi's CEO John McAfee.

But, as we see people leaving Facebook, Twitter, and Google/YouTube for decentralized platforms, I predict MGTi and other crypto-miners will go up exponentially. But, it will take an equivalent exponential awakening with users still tied to legacy social media.

Hence, I am looking at this all as a 10 year arc.

A film from Adam Sandler, Funny People (2009), (and actually one of the only Sandler films to make me actually laugh), had a scene in it where Adam and a friend pick up some women at a party. The women work for MySpace and were having a huge party. In a scene in a pool, Adam drunkenly yells, "Fuck Face Book!".

So basically, we are waiting for everyone now on Facebook to feel the same way. Pretty sure that video of Mark Zuckerberg did a lot of damage to his brand. I mean come on! The guy walks like his butt is so tight he could eat coal and crap out a perfect diamond!

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I would think so as well. I think that eventually money will start sorting through what the good investments are vs. the not so good ones. Money will eventually move into the ones that actually have some substance vs. the ones with the best promotion. That may take some time still though.

Short Squeeze baby!!!

Ain't no call like a margin call!!

Hopefully this will be a catalyst for more upside! This sideways movement is ehhhh

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Agreed. Having a large margin short position is potentially much more significant than having just a large short position.

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Absolutely! That is how you rekt as they say! The bitmex liquidation bot is a fun one to follow on Twitter!

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Thanks for the tip!

Some crypto exchanges make it too easy to trade on margin risking that people who have no idea what they are doing (and no real concept of the risks) can trade. Many willmlose their shirts.

Good info on the shorts and its about time for a major squeeze!

This is precisely why I never trade on margin and never wanted to. There is way too much downside risk of getting your entire position liquidated in a single instant. Market manipulation is still a huge factor in the Bitcoin space as we can clearly see :-X!

@JrCornel... Thank You for sharing @TechWizardry post along with Your insightful comments.

Here is another source of information below regarding the reasons for Bitcoin's sudden $1,000 rise by Arcane Bear.

Thanks Again...

Cheers !!

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He could have uploaded to dtube!

It was nice to see the little bump in Bitcoin today and a really nice surge for Steem, up 37% as of an hour ago. My hat is off to all of those who have stayed strong through these low times and have held tight. There will be an upward swing soon enough. The market is to rich with positive projects and initiatives not to head upward eventually. Not sure I will ever have the stomach for day trading but will always be a long-term hodler.

The traders look at these levels very closely to force the hand of those on the wrong side of the trade. If volume is sustained here, we could potentially get a good squeeze going to break the medium term downtrend.

At last bulls attack that!!! Now it is necessary to be very careful not to get to a bear trap.

Nice post..

Once the people see the up rise in price they will buy in, then those who have the real knowledge will sell off and rob those who buy high when there is no reason for the increase. right now it's unstable and unless you know what you're doing you will lose your greedy little butt off. I will be watching company data not the markets reaction, in order to buy smart.

BTC including others Alt coins are rising. Hope it will continue.

What a good sharing that need to be shared! Woohoo

Well these margin shorts are really awesome, they can let you touch stars and can let your desires crushed, so we should be very careful with this one.

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Haha yes, well said.

I really don't understand much of this but I know it's good.

Sage analysis.

I noticed the shorts building up over the previous few days, and that does present a juicy target for the market to 'rek'.

It's interesting that so much negative news coincided with the introduction of shorts... AND that over the last few days we've seen some super positive announcements like Rothschilds, Soros, Rockefeller jumping into crypto, plus the EU teaming up with positivity, and China investing $1.6bn into crypto. Just as it's time to turn the tide on the build-up of short positions.

Does it make me a conspiracy theorist to think this may not be coincidence?

Margin trading seems very risky. If the chance of winning equals to the chance of loosing, then it's just like betting.

Hello friend, I loved your publication. I support you with what you say, I invite you to visit my profile and have your support, greetings.

Yeah! Interesting news, and nice graph.I think it is awesome that bitcoin jumped in a short time.
Thanks for this nice post and thanks to inform us.

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Of course, thank @techwizardry for putting that together for us.

Seems like the WallStreet traders tried to bet on a full bitcoin collapse :) So they lost a lot of money now. Good :)

Thank you @jrcornel (and @techwizardry of course:-)) for this great explanation. Just to be sure, as I'm not a professional trader, prices are surging because loads of shorts are having to cash out. Traders that bet on BTC price descending even more come to the realization they bet wrong. This is how I understand it. Now, If I'm not all wrong, this is far better than a lot of other explanations I've seen on this sudden push upward. Take this for example: Bitcoin Surges; Research Paper Says Cryptos Compliant with Sharia Law. With this intro:

Bitcoin and other virtual coins rose on Thursday, after a research paper claimed that the virtual currencies were compliant with Islamic religious law, or Sharia law.

People who read this might think we got Allah to thank for this possible trend reversal!

Thank you for keeping us well informed!

Your post is very good!

Now look me in the eye and Follow Me @cryptopay-blogYour post is very good

I also thought the price would go lower. I still think we will see lower lows in coming days or weeks.

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watch more tv

Nice post@jrcornel...... well researched. I hope you will follow, comment and upvote on my posts. Thanks

Great post. One swipe cut some poor shorts. ..great read and post

Bitcoin, a magical thing, was not recognized when I touched it. Unfortunately, I didn't realize its value at that time. I now know the blockchain and I am willing to learn about it. One is from China. Novice @chineseman
比特币,一个神奇的东西,我在接触它的时候,它还不被认可,可惜我当时也没有认识到它的价值,现在才知道区块链,也愿意来了解它,一位来自中国的新手@chineseman

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Squeeze those greedy mother f'ers!

I've shorted stocks before but I wasn't bold or stupid enough to do so at such strong support levels after they'd already dropped significantly in price. That's just BEGGING for a margin call. I have no sympathy for those whose heads are in this vice of a trade (short squeeze) right now.

Hopefully some JP Morgan traders are getting spanked right now...

This is very common with bottoms and tops, you can also see the people will likely get LONGER here and then when THOSE GUYS puke it up later this year will likely be THE Bottom