Crypto - The comeback of short sellers on Bitcoin

In recent weeks, the price of bitcoin has remained confined around $40,000, following its peak of nearly $69,000 in November 2021. This lull has encouraged the return of short sellers, those crypto players who bet on a price decline. Not only classic shorts, but also speculative positions with high leverage, which are particularly risky….

Resurgence of Interest in Short Positions on Bitcoin

After reaching its all-time high of nearly $69,000 in November 2021, the price of bitcoin corrected to return to around $36,000 at the beginning of 2022. A drop that pushed away bears, those players betting on a decline in prices.

But the recent rebound above $40,000 seems to have reopened their appetite. Not only are classic shorts resurfacing, but also leveraged shorts, which are especially risky.

Massive Liquidations Ahead

According to the liquidation map, which tracks critical price levels for the highest leveraged shorts, a significant volume of these positions are at risk. Just in case of a bounce above $45,000, the equivalent of hundreds of millions of dollars in shorts could be liquidated.

The next tier for bitcoin is at $47,000. If progress is made beyond this level, this time several billion dollars in short positions could go up in smoke, including many leveraged shorts.

A Crypto Market Still Liquid

Fortunately for the short sellers, the Bitcoin market maintains sufficient liquidity for the moment. Even in the event of a rebound to $47,000, the massive influx of buy orders required to cover short positions could be absorbed by the market.

This relative depth is a safety net for bears. It gives them some leeway to manage their positions. But it could also entice them to take even more risks with leverage, betting on more pronounced price drops.

With the massive return of short sellers to bitcoin, the crypto market is experiencing some speculative effervescence. The bears are trying to take advantage of the surrounding volatility, but with the risk of heavy losses in case of bad timing.

Although the market retains sufficient liquidity for now, caution is advised before giving in to the temptation of leverage.