What’s Behind the Increasing Number of Bitcoin Longs on Bitfinex?

The possibility of this occurrence preceding a long squeeze has likely been invalidated, since the rapid price decrease of December 17 did not cause the number of longs to go down. Therefore, this could be a whale or a number of whales who are stacking Bitcoin at lower prices in anticipation of a significant price pump. Cryptocurrency Twitter personality @themooncarl, who is also the owner of a Bitcoin-related Youtube channel, expressed disbelief at the Bitfinex long chart, which has been consistently increasing since November 24.

Wow, what is actually going on in the @Bitfinex longs chart? 👀

Are whales getting ready to pump the #BTC price?

Seems like something is up here. Can someone please explain to us what is happening down below??? 🧐 pic.twitter.com/ggG5DAEzR1

— The Moon 🌙 (@TheMoonCarl) December 18, 2019

This is an odd matter since the price has been decreasing significantly while long orders are doing the opposite. Initially, this sparked fears of a long-squeeze, an action in which the price decrease causes speculators to close their longs. This usually leads to an even more pronounced decline in the price of the asset. However, traders do not have an obligation to sell, though they usually do out of fear. In the current case, the initiators of these longs are holding and even adding to their positions at lower BTC prices. Therefore, the possibility of a short squeeze looks minimal. So, the next logical option is that a whale or a number of whales are consolidating orders in order to buy Bitcoin at cheaper prices before pumping the price upward. Due to the very rapid and strong decrease, this is a risky proposition, as stated by another trader @filbfilb, who expressed similar disbelief and confusion at this event.

I dunno what you’re doing Mr Finex whale but it’s an impressive flex. pic.twitter.com/FX0qMi5vh5

— f i l ₿ f i l ₿ (@filbfilb) December 17, 2019

At 14:00 (UTC+1), December 18, the Bitcoin price initiated a minor upward move with decent volume, increasing by 4.5% in slightly more than an hour. In case this was the beginning of the said pump, then the tactic could have been successful. However, this increase pales in comparison to the previous price decrease that has been ongoing. At the time of writing, the number of longs was at 47,030. Since Bitfinex has a daily trading volume of roughly $27M, it has significant sway on the crypto market, being the fifth-largest exchange in the world as sorted by trading volume. Therefore, the increase in long orders could very well be a sign of a major market movement.

Bitcoin Long/Short Ratio

Another interesting development is the ratio of longs to shorts. It first made an all-time high of 4.7 in July and followed that up with 5.2 in November. This means that for every 5.2 long orders in the book, there is one short order. On December 14, the long/short ratio reached an absolute high of 7.64. The decrease on December 17 and 18 has caused the number of shorts to increase, so the ratio is now at 4.33. We suggested this decrease will occur as a result of the high long/short ratio in our previous article. However, the current decrease in the ratio is not a result of long orders being liquidated, but a result of short orders increasing. As the price goes down, it is expected that those short orders will close as traders have already realized profits. Additionally, if the hypothetical price pump occurs, it would likely liquidate a number of shorts, causing the long/short ratio to increase.