None of the Bitcoin ETF proposals have been accepted by the U.S. Securities and Exchange Commission and the head honcho price felt the burn but for how much longer?
Investors and retail traders had speculated this long ago. An ETF approval would drive the price higher whereas an ETF rejection would just as powerfully bring the price down. When the ETF application got rejected on August 23, the Bitcoin price hit bottom at $6337.70. However, within only a few days, the market climbed back up to the $6,944 region.
This shows that the bulls are still in control of the Bitcoin segment of the market and the real question now is: What can move the price higher? This obviously depends on various different aspects.
Firstly, an ETF approval would surely strengthen the case for bulls but I don’t think that is likely to happen this year. In my opinion, the likelihood of seeing a Bitcoin ETF could be placed at the beginning of the first quarter of 2019.
The second most important factor is the short squeeze. This happens when a stock or commodity increases higher at a sharp rate on the charts, which in most cases forces short sellers to eliminate their short positions.
To understand how that works, look at the recent CFTC (Commodity Futures Trading Commission) data. The recent figure show that the total number of long positions is 2,160 and the total of short positions is at 3,426. Whereas, the week prior to the ETF being rejected, the number of long positions was 2,104 and that of short positions was at 3,636. This portrays that there was an increase of 56 for long and a decrease of -210 for short.
However, the devil is in the detail. The CFTC chart shows that a larger number of participants are on the long side, which is 33. Whereas, there is a lower number of participants on the short side, totalled at 14. This informs us that despite the weekly fluctuation participants are more on the long side.
Now let’s factor volume in. The volume of the open interest is more on the short side. On the other hand, the short side is still on the verge of decreasing. The participants who hold short positions are no longer comfortable with their portfolio.
Perhaps, this is an early indication that the trend is about to change. In addition to this, if the number of participants on the long side continues to rise, there is a higher probability of short squeeze, i.e., investors holding short positions will liquidate their portfolio to cover their losses. This could trigger a spike in the Bitcoin price. When I say spike, I mean targeting the level of $12,000.
Last but not least comes the spreading segment of the chart, which is essentially the difference between the number of long and short positions. For example, if there are 30 long and 35 short positions, this would work out to be a spread of 5. The chart shows that the current figure for spreading is 120, which has decreased by -75.
This tells us that the previous figure for the spread was 195. This figure, which comes under spreading in the chart, means that buyers and sellers are not content with the number of trades they are currently holding on either side of the market. As for traders, this validates that higher volatility could be on the horizon.
Banking/currency crisis made the Bitcoin famous and we have seen that how Greek debt situation and the overall crisis in the Euro-zone made investors to look at alternatives. Bitcoin was just sitting there waiting for this event and this very fact pushed the Bitcoin price to its all time high. I do believe that another similar crisis in currencies (monetary policy) or banking crisis will shake the sentiment once again and this would have the potential to push the Bitcoin price all the way to $50,000 or even higher.
Disclaimer: I hold BTC and other crypto currencies