BTC LONG/SHORT - AN INSIGHT TO UNDERSTAND WHAT THEY ARE SAYING
We all watch those two indicators very often, but they separately do not provide much information as when used combined. Also, as mentioned in the linked idea, their absolute value is not that useful as well.
But, when used them together and with the ratio betweenthe two (LSR), we can draw a couple of conclusion.
1 - We can state that the number of longed BTC for STRONG HOLDING perspective (so with no active trading and not sensitive by market movements) is 16,000, so we should not expect it goes below that level (if it does, would be a problem).
It did go close in a couple of occasions, highlighted with red circles: the first one was during the fall from 20k to 12k and the second one was what it was thought to be a relief from 3k to 5.5k (many used that rally to download what they thought to be a "bad investment" at the price where it was months before). If the number of longs were not touched at those moments it means the BTC holded are not circulating: if someone did not sell in those occasions, it means it is a HODLER, and no matter what they will keep their btcs. We also see that from the fall from 6k to 3k, 16,000 more BTC were bought: just a coincidence or actually those hodlers exploit that fall to buy another 16,000 BTC and double their positions at a great price in a LT perspective?
So, number of Long BTC actively traded (e.g. with traders having a position long) as to be adjusted: the total sum of Longs minus 16,000.
Also, 28-30k Long BTC area is an indicator of bull or bear market.
2 - Different story is for SHORTED BTC. First of all, short traders enter positions also for small retracements in an uptrend, so they are not really an indicator of the trend (that is why we use Long 28-30k level only to determine in which phase we are in).
Typically, the short position is leveraged (hence riskier than just a 1x Long one) and held for a limited period of time (btc would for sure liquidate you with its sudden spikes) and unless people shorted from 20k in Dec 17 or at 14k in June 2019 it is hard to think shorters have their position open for a long time. Hence, this number does not need further adjustments.
3- The long short ratio is at this exact moment at 1.6, meaning that for each BTC shorted, there is 1.6 longed as of today (see the indicator below the price chart). Seems bullish right? If we adjust for the "inactive" 16k btc though, we get 7k btc longed and 12k shorted meaning that more than 60% of traders are short right now.
You draw your own conclusion based on if your are a contrarian or a trader follower, or if you consider exchanges as punishers for the herds. I just shared a tool.
Please not that the number indicated is the number of BTC longed or shorted, not the number of people longing or shorting and it relates to Bitfinex only. We can assume that the trend extend to other exchanges also, and it is another reason not to watch at absolute values too much.
But, when used them together and with the ratio betweenthe two (LSR), we can draw a couple of conclusion.
1 - We can state that the number of longed BTC for STRONG HOLDING perspective (so with no active trading and not sensitive by market movements) is 16,000, so we should not expect it goes below that level (if it does, would be a problem).
It did go close in a couple of occasions, highlighted with red circles: the first one was during the fall from 20k to 12k and the second one was what it was thought to be a relief from 3k to 5.5k (many used that rally to download what they thought to be a "bad investment" at the price where it was months before). If the number of longs were not touched at those moments it means the BTC holded are not circulating: if someone did not sell in those occasions, it means it is a HODLER, and no matter what they will keep their btcs. We also see that from the fall from 6k to 3k, 16,000 more BTC were bought: just a coincidence or actually those hodlers exploit that fall to buy another 16,000 BTC and double their positions at a great price in a LT perspective?
So, number of Long BTC actively traded (e.g. with traders having a position long) as to be adjusted: the total sum of Longs minus 16,000.
Also, 28-30k Long BTC area is an indicator of bull or bear market.
2 - Different story is for SHORTED BTC. First of all, short traders enter positions also for small retracements in an uptrend, so they are not really an indicator of the trend (that is why we use Long 28-30k level only to determine in which phase we are in).
Typically, the short position is leveraged (hence riskier than just a 1x Long one) and held for a limited period of time (btc would for sure liquidate you with its sudden spikes) and unless people shorted from 20k in Dec 17 or at 14k in June 2019 it is hard to think shorters have their position open for a long time. Hence, this number does not need further adjustments.
3- The long short ratio is at this exact moment at 1.6, meaning that for each BTC shorted, there is 1.6 longed as of today (see the indicator below the price chart). Seems bullish right? If we adjust for the "inactive" 16k btc though, we get 7k btc longed and 12k shorted meaning that more than 60% of traders are short right now.
You draw your own conclusion based on if your are a contrarian or a trader follower, or if you consider exchanges as punishers for the herds. I just shared a tool.
Please not that the number indicated is the number of BTC longed or shorted, not the number of people longing or shorting and it relates to Bitfinex only. We can assume that the trend extend to other exchanges also, and it is another reason not to watch at absolute values too much.
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Or simply you don't want to risk it?
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Check it out now → ftmo.com/en/?affiliates=2427
