Bitcoin Price Explodes to $7.6k As Shorts Get Squeezed Out

Bitcoin (BTC) has delivered on its reputation of shocking price movements - surely not for the last time - by climbing more than 25% in the past four days, more than likely ending the bear market of 2018.

The leading crypto went “parabolic” last night (that is to say, straight up), blowing through all reasonable resistance levels.

12 may bitcoin pa(source: TradingView.com)

For now, BTC is finding support just above $7,000, and has stabilized there. But, volume on the pumps has begun decreasing as of the latest pump. What’s more, strength has begun to wane on the relative strength index (RSI) between peaks, suggesting that the incredible rally may finally be topping out.

12 may bitcoin pa(source: TradingView.com)

One of the most important metrics to pay attention to right now is the ratio between long and short contracts, which data are available for the Bitfinex exchange. Shortsellers, betting that price would be contained at $6,000, have taken an absolute thrashing since May 8.

12 may bitcoin pa(source: TradingView.com)

The number of shorts had been climbing in the direction of historic highs, but we can see that the number of contracts is now dropping precipitously. Short contracts on Bitfinex number about 26,000 at time of writing, down from 33,000 days ago.

Longs, on the other hand, have been going in the opposite direction, exploding 30% in the last couple of days to more than 23,000 contracts - although this is nowhere near historic highs of nearly 40,000 contracts.

Being that the majority are still in favor of the shorts, there is probably still plenty of rocket left in the rally, if the bulls can muster the cash to push prices yet higher. This is the case because many traders are stuck in their short contracts, begging for the market to come back down to their breakeven price.

The bet that price would be contained at $6,000 was a perfectly reasonable trade to make, and many traders probably bet too heavily on this containment - they are reluctant to sell. When they are finally liquidated en masse, we could see another massive spike to the upside.

Certainly, nothing is off the table at this point, with Bitcoin’s price having already sliced through very deep resistance zones.

The views and opinions expressed here do not reflect that of CryptoGlobe.com and do not constitute financial advice. Always do your own research.

CME Looks to Double Bitcoin Futures Limit, but Is This Wise?

The Chicago Mercantile Exchange (CME) has a new request for its regulator, as it looks to double open position limits on bitcoin futures contracts in the face of significant interest.

Nasdaq reports that the CME has already petitioned its regulatory body, the Commodity Futures Trading Commission (CTFC), asking for an increase from 1000 contracts per spot month to 2000 per investor. Each contract represents five BTC, so essentially, at its peak,  a single investor's total position may edge towards a monumental 10,000 BTC.

This is in direct response to the contract's recent growth which is currently depicting record levels of activity, citing $370 million being traded per day. A spokesperson for the CME noted that the idea to increase limits was proposed on the continued maturity of the market:

Based on the significant growth and acceptance of our financially-settled CME Bitcoin futures markets, as well as our analysis of the underlying bitcoin market.

However, as Nasdaq writes the increase in the upper limit of positions is somewhat superfluous. As of July, the number of open interest contracts reached an all-time high of just 6100; given this, it seems the CME may be future-proofing.

Open to Manipulation?

However, concerns remain about the limit increase, as without them, the potential for manipulation rises; often to the detriment to the underlying asset. Although, as per the CTFC website, the threat of manipulation from bitcoin futures contracts is "low":

In general, position limits are not needed for markets where the threat of market manipulation is non-existent or very low.

Instead, Nasdaq posited that this might point to a lessening on the CTFC's strict rule of bitcoin; as well as a maturing of the market in general.

Nevertheless, some believe the CME's bitcoin futures contracts do pose a significant threat to the price of BTC; with some suggesting that blatant manipulation continues unchecked within the market.

As reported, there seems to be a correlation between the expiry dates of CME bitcoin futures contracts and a lull in the price point of BTC. In several instances, a significant drop in bitcoin's price has coincided with a closure from the CME. The most recent example of this occurred on Labor Day, September 2, when bitcoin rose an extraordinary 8% shortly after the CME shut.

Crypto analyst, Alex Kruger, highlighted this, noting the large gaps which formed on the CME chart, from the price discrepancy before and after closing.

This has become a pretty accepted practice within the market. Kruger has even gone to the lengths of compiling statistics each time this phenomenon transpired:

On these occasions, bitcoin cited an average 4.6% price discrepancy following the close of the CME.

Whether this is a coincidence or the market is indeed being actively manipulated is as yet unclear. Either way, with the increase of these limits it might be only a matter of time until we know for sure.

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