Bitfinex bears closed their short positions before Bitcoin dropped below $32,000

Bitcoin’s price is still depressed, trading close to $33,000 and stuck in a downtrend that only seems to get worse with each passing day. As prices plummeted, analysts consulted various technical metrics and on-chain data to explain the price collapse, but it’s difficult to pinpoint the exact reason.

One area of ​​interest was the sharp increase in short positions in Bitfinex last week. Traders are placing an exaggerated importance on these Bitcoin (BTC) margin sales as if they were predictors of the current market crash. Still, as the Cointelegraph previously reported, analysts forget that Bitcoin margin buys are generally much higher.

As #Bitcoin is slowly bleeding towards the lower range (30-32K), we can see that Bitfinex shorts are gradually closing
Still big shorts are open, but half of them are already closed
Keep an eye on this Finex whale that was a key player in the May 19 crash.

On June 18, long positions outperformed Bitfinex shorts by at least 22,800 BTC, but 87% of short positions were closed before June 22nd. Currently, long positions are 43,850 BTC higher than the amount sold.

Although short positions are usually from experienced traders, it is unlikely that they knew in advance that Chinese banks would prevent their clients from engaging in cryptocurrency or mining activities.

More importantly, these bearish positions were built while MicroStrategy was buying $500 million worth of Bitcoin after a successful private senior guaranteed note offering. To make matters worse, Michael Saylor’s business intelligence firm has announced its intention to raise another $1 billion by selling shares to buy Bitcoin.

Bitfinex margin shorts (blue) vs. Bitcoin price in USD (orange). Source: TradingView

On June 6, short positions increased from 1,380 to 6,700 at an average price of $36,150. Three days later, another 12,180 short positions were added when Bitcoin was trading at $37,050. Finally, between June 14 and 15, sells rose from 6,000 to a peak of 25,000, while Bitcoin averaged $40,100.

When looking at Bitcoin prices when short position increases occurred, it is reasonable to assume that the 23,500 contract increase (green circles) had an average price of $37,625.

Related: Traders look for bearish signals after Bitcoin futures pull back

Traders closed positions before BTC fell by $32,000

These short positions were closed steadily over the past three days, when Bitcoin was already trading below $37,000. However, 17,000 contracts sold had already been closed when the price plummeted to less than $33,500. Therefore, it is unlikely that the average price would be below $34,500.

No one would complain about an 8% gain, selling the market short to make a profit of $73 million. However, it’s essential to note that on June 16, when Bitcoin hit $40,400, those shorts were under $65 million.

This analysis shows how even highly professional traders can dive deep into water. There’s no way of knowing whether this trade would have been profitable if the crackdown on China hadn’t increased the price of Bitcoin or if MicroStrategy managed to raise $1 billion before the price drop.

If one still believes in market manipulation, at least there is comfort in knowing that professional traders can also face drastic losses. However, unlike us mortals, whales have deep pockets and the patience to contain even the most severe storms.

The views and opinions expressed here are solely from the author and do not necessarily reflect Cointelegraph’s views. Every investment and trading movement involves risk. You must conduct your own research when making a decision.


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Thomas Miles

Cryptocurrency is the most recently discovered currency which will be likely at the help of modernization across the next few decades. With a limited control from the government, the crypto market is independent of many features of a sound market as we know it. Thomas brings these stories to us by weaving them into articles of general importance to all those looking at the fluctuations in the market, or new entries. Thomas is also the founder of Bulletin Bits and is an excellent leader. His leadership is the kind that makes him the most knowledgeable and experienced on the team. His wonderful work ethic and attitude are worthy of imitation!

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