BTCUSD and BTCUSD Long Squeeze and still bearish

BITFINEX:BTCUSD   Bitcoin / U.S. Dollar
There has been a lot of conversation about BTCUSD and the Longs approaching a high level so I thought I would look at the short history of BTCUSD Longs on Bitfinex and see if there is anything we can glean. This isn’t a full academic study but my first impressions looking at the data.

First a note about these ranges. You cannot anchor them so as you adjust the y axis the bars don’t move, so the percent changes are a lie, but they do give you some idea of relative change. I have the ichimoku cloud on there but I eliminated all the spans for readability.

At first glance I find the orange bars most interesting. We see a drastic drop in the number of longs with a very little difference in percent change of BTCUSD . My two main thoughts are a lot of people opened positions with extreme leverage in their enthusiasm, completely consumed with FOMO and the idea that BTCUSD can only go up and they got liquidated by a relatively small change in price.

An assumption that gives more credit to the traders is these positions were not liquidated, but the traders took their positions off the books when they saw the price stall. Either they took profit if they opened their longs earlier or, having just opened their longs recently they closed them manually or via stop loss.

The red bars show where there were clear warning signs in the price action that a deeper drop was going to come and we see that was backed up by a rise in shorts. Most traders don’t short but given that shorts rose it is my assumption that that a higher portion of the longs in the red were taken off the books, rather than being liquidated. Countering that assumption is the second red arrow we see both longs and shorts climbing.

Purple??? Really, I don’t know. The longs exited too soon and the shorts declined too soon as well. Purple doesn’t seem right.

Green also does not make sense when combined with the green arrow. I could imagine a massive amount of people being taken by surprise that the end was upon them but shorts dipped as well. Maybe shorter were not emotionally committed or were spooked after the purple area, but as I mentioned, the purple arrow doesn’t make sense either.

Grey seems to be the best example of a pure long squeeze. We were in a trough, a daily MACD had just occurred and we were taking off and then a red candle wipes out two days worth of gains and sets up the shorts to be liquidated a few short days later.
If we are due for a long squeeze both the red and the orange long squeezes could be endured by traders that are not excessively leveraged. The red gives traders time to get out and the orange has such low relative percent change that most of us wouldn’t be taken to the cleaners.
Quite frankly most traders could even get through the grey area which looks the most like a artificial long squeeze so long as they avoid exuberant uses of leverage because they thing the great bull run is upon us.
Finally, I am still biased bear and I have a strong suspicion we will be rejected by the cloud outright or we will get rejected in the cloud. This will give us a lower high and set us up for another lower low on this leg down.
I am still bearish due to the monthly chart and an understanding that bubble theory demands we go below the linear price line, in thick red.
Comment: The area between the red line and the green line is the behavior I suspect (and lets be honest, hoping) to see a repeat of. Convergence of the longs and shorts and a similar drop in price. Right of the green line we see that longs are starting to drift down and shorts are starting to drift up. That is a good start. We presently have the benefit of hindsight to know the downtrend was mostly over when shorts decisively dropped below the longs again.

IF the convergence happens again AND we are lucky enough to see the zig zag overlap then the same action MAY predict the downtrend is roughly 80% done, give or take.

If you go back to my original post I hope we see the red range activity, where I think there were enough warning signs that most of the orders wend down due to long just taking their orders off the books, or setting stops appropriately so they don't get taken to the cleaners. But there are probably some guys going longs hoping that I have my stops in place for my shorts so I don't get taken to the cleaners.


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