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.

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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.

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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.

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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 and do not constitute financial advice. Always do your own research.

Bitfinex Wants to Offer 100x Leverage For Crypto Derivatives Trading

Michael LaVere
  • Bitfinex will offer 100x leverage trading for cryptocurrency derivatives
  • According to the exchange's CTO, the hedging product is "ready for prime time"

Cryptocurrency exchange Bitfinex revealed it wants to offer derivatives products with up to 100x leverage for cryptocurrency traders. 

Hedging On Cryptocurrency Derivatives

Chief Technology Officer Paolo Ardoino told The Block on June 25 that the cryptocurrency exchange was ready to ship a 100x leverage product for certain users. According to the post, the project has been under development for some time and is “now ready for prime time.” 

The product was referenced in last month’s whitepaper published by Bitfinex for its $1 billion private token sale of LEO, stating

“Qualified Bitfinex account holders will be able to trade a new hedging product through a derivatives wallet.”

The whitepaper originally claimed that the new hedging mechanism would be released by the end of June, a timetable that fits with Ardoino’s “ready for prime time” statement. 

Ardoino confirmed that only “verified” customers will be allowed access to the product, given the risks involved in such highly leveraged trades. 

The CTO also took to Twitter to quell user concerns over Bitfinex’s existing 3.3x margin trading. Ardoino explained 100x leverage will be “optional,” and that their current leveraged trading products will be unaffected by the release. 

Big Risk, Big Reward

Bitfinex is looking to compete with rival exchange BitMEX, who already offers 100x leverage through its bitcoin perpetual swap contract. However, Bitfinex claims its product is designed as a legitimate hedging tool for clients, rather than a gambling mechanism. 

Max Boonen, CEO of trading firm B2C2, believes the product will only appeal to retail hedgers, as large investors will shy away from the risks involved in 100x trading. 

According to Boonen, 

“There’s nothing wrong inherently about 100x. But as a commercial hedger you want lower leverage margin. The larger investor wouldn’t want to take the risk of 100X, typically. They don’t want to go balls to the wall.”

The cryptocurrency derivatives market has been heating up. Last week bitcoin-bull Mike Novogratz’s Galaxy Digital announced plans to offer cryptocurrency options contracts.

Binance has also reportedly been exploring futures trading. On June 24, Binance CEO Changpeng Zhao tweeted the exchange had executed its first margin liquidation for a BTC short.