Bitcoin´s short positions increase and point to prices below $35,000

Bitcoin, the world's largest cryptocurrency, has been involved in a strong volatility during the last two weeks, hand in hand with the sharp movements in the financial markets. During this period, the price managed to break above the $40,000 levels on two occasions, however, it was unable to stay above and has been trading lower under heavy pressure, compounded by a series of short positions, according to a report.

The cryptocurrency is trading below $39,000 on Friday and continues the downtrend started on Thursday. Ethereum also looks vulnerable to further declines, trading near $2,500, while the rest of the market is mixed, with most tokens ranging between 1% gains and declines of a similar percentage. Total capitalization is also down and sits at $1.73 trillion, according to CoinMarketCap.

Bitcoin consolidates on Friday after giving up nearly all of its earlier gains on Thursday. "The surge in risk appetite saw Bitcoin soar higher yesterday," stated Craig Erlam, an analyst at Oanda, "a move that was always vulnerable given the massive volatility and headline-driven price action. There was also a suggestion that President Biden's executive order on digital assets may have been behind the rally," due to the benign and constructive nature for the market that has been highlighted by many analysts. All in all, the expert warned that "cryptos remain very sensitive to gyrations in risk-appetite."

Apart from market conditions and fundamentals, a Datamish report, cited by market sources, points out that some large investors (or institutions) borrowed about 1,500 Bitcoins from Bitfinex for short positions. Currently, a total of 3,063 Bitcoins have been borrowed, and most of the short positions are non-hedging.

If the increased short positions become a reality, we may see Bitcoin head below $35,000 and as low as $30,000. Many analysts have not ruled out the possibility that the price could return below the $30,000 levels.

From a technical analysis point of view, the price was not able to sustain above $40,000 and, in fact, was rejected in the $42,500 - $42,700 area, where resistance can be seen on weekly charts.

Regarding the very short term, "Bitcoin´s price is in the no man's zone, somewhat away from key supports and resistances. There is an important support in the rising straight line that joins each and every one of the successive rising lows since last summer," commented José María Rodríguez, analyst at Bolsamanía. "Not to mention the January lows ($32,855) and the February lows ($34,295). And above, we have the latest declining highs with special relevance in the February highs ($45,905)," he added.

"There is still a lot of work to be done, but there is no doubt that above $46,000 we will have an important sign of strength for the king of cryptocurrencies. It would undoubtedly be a before and after. In the same way that the perforation of the January lows would be a new cold water pitcher", the analyst concluded.