Most traders realize that shorting an asset is not as lucrative as longing it. In other words, if you are long on Bitcoin (BTC), the price could go up more than 100% but if you are short, the price could fall 100% only if it goes to zero which I think will never happen. That being said, this does not mean that traders should not short Bitcoin (BTC). Sometimes, the opportunities are far too good to ignore. However, in times like these when liquidity is low in other cryptocurrency pairs, most traders get interested in Bitcoin (BTC) and Ethereum (ETH) and therefore in margin trading.
Most new traders use the same approach of buying into hype and selling into fear with margin trading. While in regular trading, they may still see their coins rise in value someday, in margin trading, their accounts could get wiped off and they do. Panic selling or hype buying can be risky but it is not the same as buying or short selling on margin. That is a whole other game which requires a completely different approach and a thorough understanding of risk management. Recently, we have seen BTC/USD decline in steps that has once again attracted the average retail bear. There is a sideways movement followed by a decline and it is all so easy and fun to trade until it is not of course. The problem with successful trades is that it makes you feel like a genius and you forget about risk management and any of your personal strategies or principles.
Most Bitcoin (BTC) trading for the most part has historically been dominated by whales and big investors from China. Those with even a basic understanding of the Chinese philosophy and psychology would see most of these moves from afar. See, the thing is technical analysis on its own means nothing. You have to look at all this in the context of psychology and the game at play. If you just look at line and patterns like 99% of the traders do then you are bound to make the same mistakes as they do. Of course, the ultimate aim of all the plays here is maximum returns for the whales and market makers. So, you have to see ways in which they could potentially accomplish that.
The daily chart for BTCUSDLongs shows us that recent moves in the market have scared the bulls. BTCUSDLongs has declined to a trend line support and could soon see a rise but I would not be surprised if this trend line is broken short term and we see a move down to the 200 day EMA. One thing that has served me well in trading is to never trust anything that is far too obvious for the majority of traders to base their decisions on. If you look at Tradingview or Crypto Twitter, you would see that the majority of traders are now talking about a decline to $6,000 or lower levels. Don’t get me wrong, I’m even more bearish than that. I think we are going to see a decline below $3,000 before all of this is over. However, I don’t think it will happen just when everyone is expecting it. I think the market will inflict some more pain on the greedy bears before it starts preying on the overly enthusiastic bulls.