According to the latest on-chain data, investors have been excessively betting on the Bitcoin price in recent weeks, leading to its overall struggles.
Longs Vs Shorts Imbalance — How This Induced Price Crash
Wedson reported that, across 19 exchanges, there are about 71,000 BTC positioned in longs, while a relatively smaller amount of BTC (27,900) is dedicated to shorts. While this observation does not include data from the Chicago Mercantile Exchange (CME), the discrepancy between longs and shorts remains unusually large.
This imbalance is significant because when there are clusters of long positions at similar price levels, the market tends to lean into a more fragile state. Moderate pullbacks beneath these clusters often lead to a cascade of forced liquidations (known as a long squeeze) — an event which could in turn push prices further south.
These liquidation events that took place after the $100,000 and $90,000 supports were breached provided more buy-side liquidity for the Bitcoin price to topple. At the same time, most significant short positions have been closed off, making it difficult for a more defined price recovery to take place, as there is barely any sell-side liquidity to send the Bitcoin price to the upside.
For Bitcoin to recover, Wedson explained that there needs to be a significant decrease in long positioning, while short exposure goes on the rise.
The analyst explained that historical failures of the 730-day SMA have often marked the beginnings of bear markets. Thus, in the scenario where the Bitcoin price slips past its current 2-year average price, we could be witnessing the start of a long bearish cycle
As of press time, Bitcoin holds a valuation of $86,251, reflecting an over 3% price jump in the past 24 hours.
