Recent on-chain data reveals that investors have been excessively betting on Bitcoin's price in recent weeks, contributing to its ongoing struggles.
Longs Vs Shorts Imbalance — How This Induced Price Crash
In a November 22 post on X, Alphractal CEO and founder Joao Wedson revealed the underlying dynamics behind Bitcoin's recent unchecked fall. He analyzed the Estimated Long/Short Positions metric, which estimates how much of the Open Interest across exchanges is dedicated to long positions relative to short positions.
Wedson reported that across 19 exchanges, there are about 71,000 BTC in long positions, while only 27,900 BTC are in short positions. This discrepancy is unusually large, even without data from the Chicago Mercantile Exchange (CME).
This imbalance is significant because when there are clusters of long positions at similar price levels, the market becomes more fragile. Moderate pullbacks beneath these clusters can trigger a cascade of forced liquidations, known as a long squeeze, which pushes prices further down.
Notably, Wedson pointed out that traders initially believed $100,000 was Bitcoin's price bottom, but this speculation failed. Then, $90,000 became the focus, leading to another series of liquidations. Currently, $84,000 is seen as the new price bottom by many speculative traders.
These liquidation events after the breaches of $100,000 and $90,000 supports provided more buy-side liquidity for Bitcoin's price to fall. Simultaneously, most significant short positions have been closed, making a defined price recovery difficult due to a lack of sell-side liquidity to push prices higher.
For Bitcoin to recover, Wedson explained that there needs to be a significant decrease in long positioning and an increase in short exposure.
Watch Out For $81,250 — Analyst
In another post on X, technical analyst Ali Martinez noted that Bitcoin's 2-year moving average, approximately $81,250, is a critical level for its future trajectory.
The analyst explained that historical failures of the 730-day SMA have often marked the beginnings of bear markets. If Bitcoin's price falls below this 2-year average, it could signal the start of a long bearish cycle.
As of press time, Bitcoin is valued at $86,251, reflecting an over 3% price jump in the past 24 hours.
The price of BTC on the daily timeframe | Source: BTCUSDT chart on TradingView
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