Why Bitcoin Traders Holding Long Positions Can Expect BTC’s Drop to Be Short-lived


It’s been quite a painful week for Bitcoin [BTC] holders as markets tumbled, undoing its rise since the second half of July. Leveraged positions particularly benefited, as quite a number of long positions were liquidated.

Zooming out of the Bitcoin price chart reveals how Bitcoin’s price action has trapped many traders into executing long positions. Its end-of-July retracement was short-lived, creating the illusion of a stronger price floor. This may have encouraged leveraged traders to go long in expectation of a bigger upside.

The long liquidations metric on CryptoQuant has seen a sharp increase in the number of liquidations. The metric peaked at 980 long closeouts on August 19. This is the highest number of long liquidations in the past four weeks.

Source: CryptoQuant

The high number of liquidations may have contributed to additional selling pressure from August 18 on top of the normal liquidations. This could explain why Bitcoin fell by such a large margin. Its price action fell around 7.33% between August 18 and 19. This is the largest one-day price drop since mid-June.

Bitcoin’s selling pressure was strong enough to push it out of its ascending range. BTC has been trading in the same support and resistance range for the past eight weeks. Despite the heavy downside, Bitcoin is not yet in oversold territory. However, its On-balance Volume (OBV) indicator has fallen to its lowest level since March 2019. It is expected to pivot soon.

Source: Trading View

Why Bitcoin’s Current Dip Might Be Short-lived

OBV is not the only reason BTC’s outlook currently favors a bullish pivot. The Purpose Bitcoin ETF Holdings made a notable contribution to BTC’s latest decline. He razed 3,609 BTC between August 11 and August 19, which is worth over $77 million at the current market price. However, his releases have notably decreased since August 15.

Source: Glassnode

The reduction in capital outflows from institutional investors such as Purpose Bitcoin ETF Holdings confirms that selling pressure is easing. This result is further reinforced by the fact that the whales also buy the dip. The number of Bitcoin addresses holding more than 1,000 BTC has increased significantly since August 17.


About Author

Comments are closed.