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Long and short liquidation volumes have reached parity amid a shortage of Bitcoin on exchanges: what does this mean?

Relevance up to 03:00 2022-06-22 UTC–4

Over the past week, the nature of the fall of Bitcoin has changed significantly. If three weeks ago crypto investors were selling their assets due to the aggressive policy of the Fed and rising inflation, now the situation has changed. The main reason for the fall in cryptocurrency quotes was the desire to collect cheap liquidity due to the emotional actions of the players. This can be seen from the movement of the price of the cryptocurrency and the nature of the protection of the support areas. There is no impulse movement on the charts, which is realized in the form of a long green candle.

This is direct evidence that, under current market conditions, investors are not ready to manage their capital in a similar way. It can be said that, in addition to saving funds, crypto players are trying to make a profit by playing on market expectations. It turned out well, but over the past three days, the situation has reached parity. A balance was reached in the volumes of forcedly closed short and long positions. In some cases, short volumes prevailed over long ones, indicating a gradual change in mood.

We see the first results of reaching parity on the Bitcoin daily chart. The price managed to gain a foothold above $20k and move towards the $21k resistance area. Such a price movement was the result of the fact that the market was divided equally, because of which there was no point in manipulating the mood of the crowd. In addition to lower volumes and gradually falling volatility, the number of emotional decisions has decreased. This suggests that the market is starting to stabilize after another nightmarish week. In addition, Santiment notes the growing shortage of BTC coins on cryptocurrency exchanges, as a result of which the price is more willing to move to the $20k level.

This means that, despite the massive sell-off and the record-breaking realized loss in BTC history, the cryptocurrency is becoming a scarce asset. It is worth noting that in the current market situation, the growing value and scarcity will not play a key role in the price movement. But this suggests that in the coming weeks we will see consolidation in the region of $20k-$22k, with the gradual absorption of free volumes on crypto exchanges. The only thing that can interfere with such a process is sudden and sharply negative fundamental factors.

These include the decision of the Iranian government to block electricity for legitimate mining companies in the country. Given the large volumes of BTC on the balances of miners, such a policy of Iran can reduce the profitability of Bitcoin mining, which will lead to an even greater drop in the hash rate and increase pressure on the cryptocurrency.

Among other things, it is important to understand that the market is adapting to existence within the framework of complicated access to liquidity. Therefore, it is important to remember that large investors will use any opportunity to obtain liquidity in the market by creating certain sentiments (bullish/bearish). This will eventually lead to spikes in volatility and significant liquidations, as happened in the $29k-$30k range.

In general, the situation in the cryptocurrency market is leveling off. Altcoins have been starting to recover for several days after updating the local bottom. Now they have been joined by Bitcoin, which is showing local successes, such as consolidation above $20k. Despite this, there is every reason to believe that the market is waiting for another plunge below $20k, as on-chain metrics do not indicate the final formation of the local bottom.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

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