Comparing BTCUSD Longs and Shorts (amount of long / short positions), e.g. as defined by Bitfinex, one can take a general idea whether most of the market participants are short or long. So, if we draw symbol like this: 100*BITFINEX:BTCUSDLONGS/(BITFINEX:BTCUSDLONGS+BITFINEX:BTCUSDSHORTS) we will get 0% - 100% chart, where 100% would mean 'everybody bought, no sell positions at all', and 0% would mean the reverse. The current chart of this is shown above.
Now, if the ratio reaches 90% area, it means that there is 9:1 long to short ratio, and basically people are on long positions. So, the chance that more long positions will appear soon is small: it would need outside traders to open new positions. It is, however, very likely, that existing positions will start (perhaps violently) convert to short. That should theoretically bring the price down, too. If that is the case, we're likely to experience a bear force sooner or later.
Of course there is a number of other things to consider - e.g. Bitfinex data might not reflect the majority of the market. Or, the ratio can go down to 50% very slowly. Or outside traders will actually show up. Etc.
What do you think?
Now, if the ratio reaches 90% area, it means that there is 9:1 long to short ratio, and basically people are on long positions. So, the chance that more long positions will appear soon is small: it would need outside traders to open new positions. It is, however, very likely, that existing positions will start (perhaps violently) convert to short. That should theoretically bring the price down, too. If that is the case, we're likely to experience a bear force sooner or later.
Of course there is a number of other things to consider - e.g. Bitfinex data might not reflect the majority of the market. Or, the ratio can go down to 50% very slowly. Or outside traders will actually show up. Etc.
What do you think?