Bitcoin (BTC) has struggled in the opening months of the year. Now, the Bitcoin short ratio has seen a rapid increase. In the second half of March, the leading cryptocurrency has been trading in a range between $83,000 and $88,000, but this latest bearish development could herald another retest of crucial support levels.
First, let’s recap recent price action. In the past 24 hours, the price of the flagship digital asset has increased by 0.23%, accompanied by an appreciable amount of volatility. On a year-to-date (YTD) basis, Bitcoin has lost 7.43% in value.
That certainly isn’t bearish price action. In addition, readers should note the spike in volume seen in early March on the chart to the right, which indicates a strong level of demand at the $80,000 price point.
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So, what about those shorts? In the last 12 hours, 61.29% of newly opened BTC positions have been short positions, while 38.71% are Bitcoin long positions, according to data retrieved by Finbold from cryptocurrency intelligence platform CoinGlass on March 25.
Whereas long dominance peaked on March 23, it has since been on a steady, yet slow decline, which culminated in the unexpected bearish turn on March 25. Could this be the start of a wider sentiment shift?
The rising Bitcoin short ratio isn’t a cause for concern — yet
A rising short ratio can in no way constitute good news — but it isn’t time to start ringing the alarm bells either.
For one, the tide appears to be, if not shifting, then at least equalizing — in the hour preceding the time of publishing, long position volume had surged by 124.39%, and was actually outpacing short volume at the time of writing by roughly $300 million.
Per data retrieved by Finbold a day earlier, long-term Bitcoin holders have significantly reduced trading activities since the start of the year, indicating a strong level of long-term support, according to data from market intelligence platform CryptoQuant.
At present, prices are inching upward in a bid to retest resistance at $90,000. Barring any new negative developments, it’s more than likely that those levels will be reached.
With that being said, BTC, like other risky assets, is in a bit of a tricky situation. Tariff policies and the possibility of a full-blown trade war have brought plenty of uncertainty to financial markets. At the same time, key indicators such as the Dow Jones to Gold Ratio point to recession — while the equities market has reached record-breaking levels of concentration reminiscent of the dot-com bubble.
The Trump administration’s pro-crypto policies and a steady rate of adoption serve as more than enough of a barrier to offset short-selling spikes such as these.
Ultimately, wider macroeconomic conditions will play the dominant role in determining Bitcoin’s price action in the weeks and months ahead. While that isn’t necessarily entirely good news for bulls, it is preferable to an instant downturn on account of short sellers.
Featured image from Shutterstock
