Bitcoin Tops $110K Amid Record Short Bets, Signaling Market Caution
Bitcoin surged past the $110,000 mark on Thursday, sparking around $500 million in liquidations within the derivatives market. Yet, a surprising wave of traders is betting against the rally, aggressively shorting the asset despite its new highs.
In the past 24 hours, trading volumes jumped by 74% as traders repositioned themselves. However, data from Coinalyze shows the long-to-short ratio has dropped to its lowest since September 2022, indicating a significant tilt toward bearish sentiment even as prices climb.
This pattern emerged starting April 21, when many traders shorted Bitcoin after it broke above $85,000, betting that the price had peaked and expecting a double top formation. However, Bitcoin defied those expectations, climbing through resistance levels at $97,000 and $105,000.
Market dynamics contributing to this upward momentum include a rebound in U.S. equities following eased trade tensions, a rise in institutional trading activity on regulated venues like CME, and the pressure of abundant short positions triggering a squeeze.
Although short positions might typically reflect bearish sentiment, they have been fueling the upward price move by forcing liquidations and stop-losses, which add to buying pressure.
Shorting at record highs is a common tactic, with traders entering positions near resistance points and placing stop losses just above to limit risk. For example, shorts at $105,000 could profit from minor pullbacks while risking a manageable loss if prices climb to $109,000.
Interestingly, open interest in Bitcoin derivatives has risen 17% over the past day—far outpacing the 4.8% price increase—suggesting leveraged trading is driving the current rally. This raises questions about how sustainable the breakout is compared to previous moves above $100K.
As Bitcoin edges above $111,000, market watchers will be keen to see if the growing short interest continues or if it provides fuel for further upward momentum through a potential short squeeze.
