On Friday last week (12/14) we put together a piece referencing the relationship between BTC price, and Net Shorts. Our conclusion was that when net shorts covered their BTC, they didn’t markedly cause a rally in the Spot price, which to us means that the weak length left in this market was overpowering any bid these shorts put into the market.
Based off of yesterday’s price action, we revisited this chart and took a closer look. It appears that our conclusion from last Friday was an accurate description of the price action for the short covering days of during the 12/14 and 12/21, however the short covering on 12/8-12/9 is more comparable to what happened yesterday. There WAS a rally in Spot price in both of these instances of roughly about 10% from the lows. We do note, that both of these recent short covering rallies were initiated BELOW the $3,300 level so with this in mind, we may have just found ourselves some near-term support. With two bounces from this key level, it would be natural to expect some NEW length come in to buy if we come back off to test the lows.
To the upside? Well, we are in a bear market, and the weak hand is certainly the trapped length, so seeing some selling pressure, specifically around our key level of $3,600, into this rally seems like a logical outcome. What we have seen, as shown on the chart in purple, is that the $3,600 level has flipped from support at the end of November, to resistance here in December. What comes today near that battleground level of $3,600 will be a huge tell. Can the bulls take back this market, or will the bears survive (throw in the towel) and hold this market down?
Based off of yesterday’s price action, we revisited this chart and took a closer look. It appears that our conclusion from last Friday was an accurate description of the price action for the short covering days of during the 12/14 and 12/21, however the short covering on 12/8-12/9 is more comparable to what happened yesterday. There WAS a rally in Spot price in both of these instances of roughly about 10% from the lows. We do note, that both of these recent short covering rallies were initiated BELOW the $3,300 level so with this in mind, we may have just found ourselves some near-term support. With two bounces from this key level, it would be natural to expect some NEW length come in to buy if we come back off to test the lows.
To the upside? Well, we are in a bear market, and the weak hand is certainly the trapped length, so seeing some selling pressure, specifically around our key level of $3,600, into this rally seems like a logical outcome. What we have seen, as shown on the chart in purple, is that the $3,600 level has flipped from support at the end of November, to resistance here in December. What comes today near that battleground level of $3,600 will be a huge tell. Can the bulls take back this market, or will the bears survive (throw in the towel) and hold this market down?