Bitcoin has had two upbeat weeks, but some analysts believe that a short squeeze for the cryptocurrency is unlikely.
While the price of Bitcoin has dropped dramatically in 2018 since its all-time high back in late 2017, the last few weeks have shown steady support. Many believed that the cryptocurrency’s price would fall when the SEC rejected 9 different ETF applications. However, the price continued to hold above the psychological $6,000 mark. The price of Bitcoin increased a bit on the subsequent news that the SEC was reviewing its rejections.
Don’t Hold Your Breath for a Short Squeeze
Two analysts discussed how some investors are hoping for a Bitcoin short squeeze. Elemental Digital Asset Management’s Thejas Nalval, portfolio director, and Kevin Lu, director of quantitative research, say not so fast.
They point out that the price of Bitcoin, despite two weeks of upbeat gains, is still within a relatively narrow range. They say:
Everyone is talking about the short positioning on Bitfinex (as of today, roughly 39k bitcoins or $250m using current prices). Everyone is speculating on a short squeeze. Everyone is positioning a future long with stop-limit orders (hopefully). And everyone is just waiting.
When everyone is going the same way on a trade, it can effectively be deemed a crowded trade and there is a heightened risk that the price will move the ‘wrong way’ to expectations because of some exogenous factor that nobody predicted for.
Bitcoin Proving Resilient
Despite a lot of negative press lately, Bitcoin price has been rather steady. The news of the Bitcoin ETF rejections had many believing that the coin’s value would drop drastically. However, the price only dipped from $6,782 to $6,344. Two days later, the price had climbed back to $6,515. At the time of writing, the world’s foremost cryptocurrency is standing tall at $6,677.
As for the possibility of a Bitcoin ETF being approved, the SEC has pushed its decision date on the latest application back to late September. A lot of individuals are hoping for SEC approval, which will then trigger a wave of institutional money coming in. However, one man is not a fan of such an ETF coming to life: Andreas Antonopoulos.
When discussing a BTC ETF, he said:
I’m going to burst your bubble. I know a lot of people really want to see an ETF happen because ‘to the moon, and lambos,’ but I think it is a terrible idea. I still think it is going to happen, I just think it is a terrible idea. I’m actually against ETFs. I think a Bitcoin ETF is going to be damaging to the ecosystem.
ETFs fundamentally violate the underlying principle of peer-to-peer money, where each user is not operating through a custodian, but has direct control of their money because they have direct control of their keys.
Do you think a Bitcoin short squeeze is likely or not? Let us know in the comments below.
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