Bitcoin (BTC) currently presents the perfect setup for a short squeeze. The number of shorts has reached an all time high and it is not clear what the bears are thinking or better yet, drinking. At every point of reversal in a market, the investor that goes with the herd suffers the most. The mentality of bulls and bears is completely different as the former trades on FOMO whereas the latter trades on FUD. Both can use market sentiment to their advantage during an ongoing cycle. However, trouble arises when they do not realize that the trend is about to reverse. Most people who were buying Bitcoin (BTC) around $18,000 have already panic sold, with big losses. Those that did not sell wake up every day to a bloodbath that sees their coins drop further in value.
For the patient few, hodling can work quite effectively. If you do not mind missing the opportunity to buy dips and accumulate further, then you can just hold your coins even through losses in the hopes of an ultimate recovery. We have seen Bitcoin (BTC) ‘die’ countless times before. Even the CEO of JP Morgan recently said in an interview that he does not believe that Bitcoin (BTC) is something that is going to vanish overnight. A lot of people now realize that if Bitcoin (BTC) has come this far to have survived against all odds that only means that it is here to stay. So, people buying Bitcoin (BTC) or entering long positions with manageable risk will do well eventually no matter how long they have to wait.
However, those betting against Bitcoin (BTC) are playing a very different game. Time is a friend to the bulls, but it is an enemy to the bears. For the bulls, everything has to happen in the now, when the conditions are ripe. If BTC/USD stages a reversal, it can go up for a long time and may never even drop back to previous levels. This means that bears have a lot more to lose than the bulls and they cannot afford to keep their positions open in perpetuity unless they believe Bitcoin (BTC) is going to zero. The people who bought Bitcoin (BTC) at the top learnt their lesson, but the people who are selling at the bottom have yet to learn theirs. That is where the short squeeze comes in. Just as the bulls got hurt at the top, the bears get hurt at the bottom.
Patience, in this market, is all. Some people just don’t have the patience or discipline to wait for a move to play out. I have seen a large majority of analysts and speculators talking about the “failed Inverse H&S” on Bitcoin (BTC). If we look at the EUR/USD 4H chart, we can clearly see that the pattern is still in play. In fact, a look at the weekly chart for EUR/USD clearly shows that a trend reversal is in the offing. The short term time frame just shows the catalyst behind that reversal. Now, you can follow BTC/USD chart on its own and speculate that the price is going up, down, sideways or in circles, or you can accept that BTC/USD price action is nothing more but a consequence of the moves made by EUR/USD and major stock market indices, in which case you will have to wait and see how those play out.