$200 Million’ Bitcoin Short Claimed on Bitfinex; Is This Awesome or Terrible News?
The amount of BTC shorts available on Bitfinex plummeted significantly after at least 20,000 Bitcoin (BTC) worth of shorts was claimed on Sunday. Before this happened, Bitfinex recorded a very large influx of Bitcoin.
It is supposed that the claim was made by one trader or entity largely because of how fast it happened. The claim directly means that the said entity didn’t liquidate but used their own funds as available in their margin wallets for the short. The entire claim process records no activity on the order book because it’s not like liquidation where long or short positions are closed after a big move.
Bitfinex, on their website, explains claiming as the conversion
“from a margin trade into an exchange trade; closing the position by buying it yourself and settling your funding costs to the lender.”
This claim is worth $200 million and when completed, dropped the amount of Bitfinex’s Bitcoin shorts from 30,000 BTC all the way down to 9,686 BTC.
After the claim was announced, more than a few reactions began to pour in, explaining what the claim could mean and how it could affect the market in general.
This update has been seen by some as negatively affecting the Bitcoin market in general. For example, it’s been noted that a claim this large directly means that the number of open shorts available has reduced. This translates into a significant decrease in Bitcoin’s opportunity for a short squeeze. Generally, liquidated shorts – if they happen when Bitcoin is on the rise or already high – mean that it becomes compulsory for the spot market to receive an increased number of buy orders or demands. This could then shoot the price trajectory higher.
So, if there is a reduced number of available shorts then there is a reduced chance of a squeeze and if a squeeze still does happen, its prospects are a lot washed down.
It has also been said that the ratio between long and shorts on Bitfinex is now a little too disproportionate with a long to short ratio of 67% to 33%. The price of Bitcoin has dropped a little bit after the claim was made and this seems to feed the notion that there are many traders currently selling because of the Bitfinex claim. If traders continue to sell and not buy, the Bitcoin price might further drop.
There are those who believe that the Bitfinex situation isn’t all bad. Bulls have noted that a grand claim like this has happened before on Bitfinex and when it did, there was also a drop in the Bitcoin price. However, this drop did not last and Bitcoin re-adjusted and began to soar higher and even went on to set new records.
Also, Alex Krüger, a popular trader, economist, and research, has advised caution for people who intend to make trading moves based on the Bitfinex situation. This is largely because the market is known to be extremely volatile and also prone to artificially created situations by whales. Predictions can always be made but the market’s instability means that it would not always exactly follow expected moves from long or short positions.
“careful relying on Bitfinex longs/shorts for trading decisions, as may not be indicative of market positioning.”