Bitcoin Fools

2018年12月13日

"The main purpose of the stock market is to make fools of as many men as possible."
-Bernard Baruch

If Bitcoin were around 100 years ago Baruch would have been more broad with his quote. Nevertheless it is apt to all markets.

Before the last selloff there was much buzz on the Discords about a big move coming in Bitcoin. I do not subscribe to any of these Discords but I hear second hand. One trader showed me the BTCUSDSHORTS chart. This chart tracks the open interest in short positions on Bitfinex. The trader that sent me this gem had an interpretation that as the shorts were drying up... it meant that Bitcoin was going to go long. I found their reasoning to be completely backwards. Just to put my money where my mouth was; I did go short a week before. Being a contrarian paid off; as it does in the long run for any market.

As far as predictive indicators of market timing with Bitcoin I would have to cite the relationship between BTCUSDSHORTS and the underlying price as the most useful at the present time. Nearly every time that shorts were at a major high, meaning the most people were betting on a bearish move, the market instead rallied or continued to consolidate. I would chalk this phenomenon up to either the wisdom of Baruch, traders naturally chasing the market, or perhaps both as a unifying theory. The bottom line is; the market will not let the most traders have profits... especially now when the bubble of 2017 is long past.

In the future and until it proves otherwise this comparison will serve as a valuable indicator to traders and I highly recommend it be integrated into any long term to swing trading analysis. My present interpretation is that the opportunity for going short is much less attractive. A "record" number of short positions are open at the moment. Shorting Bitcoin is the most crowded trade. Even if Bitcoin goes continues bearish the reward does not justify the risk.