51% increase in short interest – but prices keep moving up
On September 2nd, there was, I kid you not, a 51% increase in the short interest from Bitfinex’s data. Let me repeat that: FIFTY-ONE PERCENT INCREASE IN SHORT INTEREST. That’s insane. I mean, words can’t describe how insane that rise is. It’s the highest ever. And it happens right below the key $7500 value area – so what does that mean?
Look at the chart above. That’s the short interest chart from Bitfinex. It’s slowly coming off of those highs, but it’s still massive. You have to think of this chart differently than any other chart. Sometimes it’s hard for people to wrap their head around this chart. It’s a bullish chart for being short Bitcoin, what you should see between this chart and the Bitcoin chart is while shorts go up, Bitcoin should go down. That has not happened. In fact, the total opposite has happened. And that’s got a lot of people who are short scared as hell.
If that BTCShorts chart didn’t have such a massive inflow of shorts, I was planning on taking some profit at 7480, and peeling some more off at 7660. But that plan just had a 51%-increase-in-short-interest wrench thrown into that plan. So what does that mean? How does that affect the market? Oh boy. It’s huge. This would have been a different matter if the short volume piled in right at 7500 or slightly above – but it hit in an odd place between 7200 and 7300. That exact inverse of that bullish candle on the Bitcoinshort chart will form on Bitcoins chart because all of those shorts have to cover: which means they have to buy Bitcoin to exit their short position. That’s huge. That’s what we call (and have been talking about) a short covering rally. So what makes me apprehensive about actually taking some profit near the 7500 value area is that it might not even get tested! With that amount of people short – and Bitcoin still moving up – we’re talking about one of those 2017 500-1k candles popping up on the screen.
Could we Bart down? Sure. But the price action going on here is very supportive – lot’s of big buying on small and larger dips (well, not many large dips are being made). This is exactly the kind of price action we want to see moving forward in the future: easy and smooth.
What does this mean?
A short rally could push prices very quickly beyond 7500 – towards 8500.