Bitcoin price is trading at around $30,000, more than halfway down from the highs it set earlier in 2021. After an enormous 60% drop, speculators fear that the cryptocurrency bull market is over, and have started to pile on short positions. But what if they’re wrong, and the bull market isn’t over?
It could lead to the largest short squeeze ever, and help provide all the fuel needed to push the price per BTC to more than $100,000 per coin or more – reaching the price predictions many top analysts are calling for.
Here are the signs to look for if Bitcoin is turning bullish, or if the top cryptocurrency fully turns bearish following this period of consolidation.
Why You Should Never Short Bitcoin At Support
Bitcoin is currently at the most important support level since its bear market bottom, and holding here means the bull market is still on, while falling from support could lead to another bear market long before anyone expected it to arrive.
However, now is not the time to go short Bitcoin. Hedging short was the right move when the once trending cryptocurrency was struggling with resistance and local highs, and going full short made sense once that level was lost. But shorting at resistance is asking for losses or to be squeezed.
Support is always support until it isn’t anymore, and smart traders use support levels to take profit and open longs. It is only when this level breaks down further should anyone go short, as the opportunity to short to the current level has already passed.
Those who have repeatedly went short during this sideways range have been chopped up in the market and left frustrated or with losses. Sitting on the sidelines and waiting for a better moment to go short is a better option.
Why Going Long Could Also Be Dangerous
Going long or buying the dip so to speak, isn’t the right idea either. With this support level barely able to hold and repeatedly tested, a long here could be dangerous. Whichever position you choose, be sure to set stop losses in case of a breakout in the wrong direction.
Because the trading range is now tight, whenever it does break the breakout is bound to be huge. Taking a position after the breakout might be the best strategy of all, but false breakouts are also a risk.
In addition to support potentially holding, technical indicators are starting to show that a potential bottom is forming. Bitcoin price is known for false bottoms that don’t hold, so $30,000 is especially risky at this point. However, there’s also the risk of being left behind if the cryptocurrency does turn back to a full bull market, and continues to rise as rapidly as it once did.
FOMO combined with a short squeeze could make the final leg up in the crypto bull market one for the record books, and make sure crypto leaves its mark on the world for good. Markets will be volatile along the way, however, and provide plenty of opportunities to go long or go short, but again, now is not the time to short.
What Is Shorting BTC, How To Go Short, And When
Shorting Bitcoin involves making a speculative bet that the cryptocurrency will drop. But shorting works best during a bear market and despite how bad the recent selloff has been, there’s no telling yet if a bear market is confirmed.
A bear market in essence is a long-term downtrend, and a downtrend is defined as a lower low followed by a higher low. As of right now, Bitcoin only made a lower low on daily and weekly timeframes, leaving the monthly at a local high. A lower high will need to be made on the monthly to confirm some type of bear phase.
If Bitcoin does turn bearish with a high timeframe lower low, the strategy should turn toward shorting each bounce. Only when lower lows stop and new highs begin will another bull market return. During the final phase of the bull market or if Bitcoin turns bearish, long and short Bitcoin using CFDs on the award-winning margin trading platform PrimeXBT.