The impact that a Bitcoin (BTC) ETF would have on the cryptocurrency market has been speculated for a while. Certainly, it could go in two ways. A Bitcoin ETF approval could potentially trigger a bull run whereas a rejection would pull the market down. Is there a method that would instill some measure of confidence in BTCs continued flourishing?
Yes, the speculators were absolutely right, demonstrated by the fact that when the proposal was turned down on August 23rd, Bitcoin (BTC) was down around $6,337.70 USD. However, a few days later, the price picked again, sitting comfortably at $6,944 USD. It is a clear indication that the market is firmly in the hands of the bulls. Though, the all-important question now is can the BTC price be revived? According to Naeem Aslam, CMA, an online broker at Ava Trade Ltd, it is possible, and here is how.
First Method: Exchange-traded Fund
Sure, the approval of the ETF will definitely strengthen the BTC price and signal new hope for traders. However, from all indications, it may not happen this year. By exerting pressure on U.S. Securities and Exchange Commission (SEC), it may come true in the first quarter of 2019.
Second Method: Short Squeeze
A short squeeze happens when a commodity or stock goes higher at a sharp price rate on the chart. When this happens, it compels short sellers to get rid of their position. To understand how it works, have a look at the CFTC (Commodity Futures Trading Commissions) data. The data clearly shows that the total number of possible short positions is 3,426. On the other hand, the same for long positions account for 2,160.
Now, a week prior to the rejection of the ETF, the same positions were short and long, 3,636 and 2,104 respectively. Spot the difference of increase of 56 long and decrease of -210 for short. It is interpreted as a high number of participants on the long 33 while the short has 14. Simply put, there are more participants on the long.
Third Method: Factor in Volume
Moreover, the volume of open interest is more on the short end. The short end is still on the verge of going southward. This means that the participants holding short positions are no longer comfortable with it. Yes, it is a clear indication that there is going to be a trend change soon. When this is underway, the BTC price will go up to an appreciable level.
Keep in mind that if this trend continues, the probability of a short squeeze happening cannot be ruled out. It means investors with short positions will have to liquidate their portfolio to make up for their losses. True, liquidating their portfolios could trigger a spike potentially targeting $12,000 USD.
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