The pessimistic sentiment around bitcoin prices saw the number of shorts hit a six-week high on Thursday.
The BTC/USD short positions on the cryptocurrency exchange Bitfinex jumped to 37,891 – the highest level since Oct. 15 – and were last seen at 36,996. Notably, shorts have risen by 95 percent in the last three weeks, accompanying BTC’s recent drop to 14-month lows near $3,500.
More importantly, the short positions remained elevated above 35,000 during BTC’s oversold bounce from $3,500 to $4,400 and climbed to fresh multi-week highs on Thursday. Further, the long-short ratio of 0.73 is biased toward the bears.
The data indicates that, despite being so deep into the bear market, sellers appear to be showing no signs of exhaustion. As a result, the cryptocurrency may revisit the recent low of $3,474 as hinted in the technical charts.
The bearish sentiment, however, could soon reach extremes as the short positions are down just 7 percent from the record high of 40,289 that was reached on on Sept. 19. Moreover, the extreme bearish positioning is widely considered a sign that the sell-off is overdone and often presages a trend reversal.
Therefore, the prospects of sudden bullish reversal, similar to the one seen on April 12, would improve substantially once the short positions reach record highs.
Disclosure: The author holds no cryptocurrency assets at the time of writing.
Market app image via Shutterstock; Price charts by Trading View
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