Bad call? Bitfinex bears closed a block of Bitcoin shorts before the drop below $32K
Bitcoin price dropped nearly $300 on Friday after Bitfinex, the world’s largest Bitcoin exchange, opened a short position three days prior. However, the statement that the short position had been opened before the price drop was released the day after the move, which means that while Bitfinex did not have the chance to profit from the price drop, that trading opportunity may still exist.
According to Bitfinex’s API which is publicly available, the large short position was closed prior to the price drop. Why did Bitfinex close the shorts? We have no way of knowing, but it is hard not to be suspicious and assume Bitfinex wanted to cover their losses – not let them sit open to take advantage of the price drop.
If you guessed that Bitfinex was one of the first exchanges to close a block of Bitcoin shorts before the drop below $32K, then you guessed correctly.. Read more about bitcoin price and let us know what you think. The price of bitcoin is still in a rut, trading near $33,000 and trapped in a downtrend that seems to be getting worse by the day. When the price fell, analysts looked at various technical and internal measures to explain the price drop, but none of them revealed the exact cause.
It is interesting to note the sharp increase in short positions on the Bitfinex exchange last week. Traders put too much emphasis on these bitcoin (BTC) margin shorts as if they were harbingers of the current market collapse. But, as previously reported by Cointelegraph, analysts forget that bitcoin’s long margin positions are generally much larger.
As #Bitcoin slowly bleeds down to the low end (30-32K), we see Bitfinex mega shorts gradually closing
Still big shorts open, but half are already closed
Watch out because the Finex whale was a key player in the $BTC crash of May 19 pic.twitter.com/c4qeb6Nxe3
– Feras_Crypto (@FeraSY1) 20. June 2021
On the 18th. June’s long positions exceeded short positions on Bitfinex by at least 22,800 BTC, but 87% of short positions were taken before the 22nd. June closed. Currently, the volume of marginal long positions exceeds the volume of short positions by 43,850 BTC.
While these shorters are generally experienced traders, it is unlikely that they knew in advance that Chinese banks would ban their clients from trading or mining in cryptocurrencies.
More importantly, these bearish positions came at a time when MicroStrategy was buying $500 million worth of bitcoin after a successful private offering of senior secured bonds. To make matters worse, Michael Saylor’s business intelligence company announced it would raise another $1 billion by selling shares to buy bitcoins.
Let’s see how these bold shorts fared.
margin shorts on Bitfinex (blue) versus the US dollar price of bitcoin (orange). Source: TradingView
The 6th. June shorts rose from 1,380 to 6,700 with an average price of $36,150. Three days later, another 12,180 short positions were added as bitcoin traded at $37,050. Finally, between June 14 and 15, shorts rose by 6,000 to a high of $25,000, while bitcoin was worth an average of $40,100.
Looking at bitcoin prices at the time of the short position push, we can assume that a push of 23,500 contracts (green circles) had an average price of $37,625.
Related: Traders look for bearish signals after drop in bitcoin futures
traders closed their positions before BTC dropped below $32,000
These short positions have been closing steadily over the past three days, with bitcoin already trading below $37,000. However, by the time the price dropped below $33,500, 17,000 short contracts had already been signed. It is therefore unlikely that the average price was less than $34,500.
No one would complain if you shorted the market by 8% and made $73 million in profit. However, it is important to note that at 16. In June, when bitcoin reached $40,400, these short positions were undercompensated by $65 million.
This analysis shows how even highly professional traders can end up underwater. It is unclear whether the deal would have been profitable if the repression in China had not driven up the price of bitcoin, or whether MicroStrategy would have managed to raise $1 billion before the price fell.
If you still believe in market manipulation, you can at least console yourself with the knowledge that even professional traders can suffer heavy losses. But unlike us mortals, whales have deep pockets and the patience to hold off the fiercest storms.
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.In the days leading up to the Bitcoin Cash hard fork in August, Bitfinex, which is known for its strange terms to describe market manipulation, and had a market cap of around $3 billion, or about 70% of the Bitcoin Cash market, shorted a block of Bitcoin Cash with a market value of over $32 million. About three hours later, the price of Bitcoin Cash fell below the short, indicating a likely market move rather than Bitfinex’s direct action.. Read more about bitcoin short interest and let us know what you think.
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