made a sneaky attempt to wipe out some shorts while targeting a recovery. Whether or not we can expect the coin to break the downtrend and make new gains is yet to be seen but as of now, it is up 11% and is looking for more action! This event today has definitely scared off margin traders and shorts most of whom lost money to liquidated shorts positions on exchanges like Bitfinex and Bitmex. Meanwhile, the bulls are cheering marking it as their victory. It seems reasonable for the bulls to market it as a success because pressure for shorts has been a big factor in suppressing the price the past few weeks. Short volume on Bitfinex was constantly on the rise during the past few weeks which created more fear and uncertainty in the markets. This recent event however ambushed the bears and hurt them badly. This does not mean that we are out of the downtrend yet but it certainly has set the ground for a bullish move ahead.
Shorts were trerribly hurt in a matter of hours as stop losses were hit. This should further highlight the risks of shorting an asset at a point when it has already gone through more than 70% correciton. It was as silly to short at this stage as it was to buy at the top when the price was near $20,000 per Bitcoin (BTC
). This could mean that for the next few days, we will continue to witness weak bearish action from the bulls. In fact, the price rose from $6940 to $7831 in less than an hour but there is no serious bearish action. If this had been on a normal day, the bears would have pushed the price back down as we have seen happen over and over again.
Such events mark the importance of buying low and selling high. You do not have to look for the perfect bottom because chances are you will never find it. So, the best approach is to start buying at the bottom when the mainstream investor
is panic selling and to start selling at the top when the mainstream investor is buying. Of course, this does not mean buying or selling in one big position. Your buy or sell orders should be spread over different price ranges in order to lower your dollar cost average.
There is a lot of speculation surrounding what caused the big spike. Most believe it was the exchanges trying to liquidate short positions. Others believe it was buy orders from one or more institutional investors who bought in one go in an attempt to break the price off the downtrend line. They succeeded intitially but the price is back under the downtrend line and limited correction could be likely before the take off. One thing is clear though that big money is ready to open the floodgates. This could happen toady or tomorrow for all we know but happen it will.