Short Squeeze in Bitcoin

We've just seen a short squeeze in Bitcoin, with a subsequent rush of useful idiots buying into Bitcoin on the belief that this is a turning point, and that we'll soon see new highs. But a short squeeze is rarely a turning point. It's merely a tactical move employed by whales. It forces the shorts to cover, thereby creating a sudden demand for whatever is being squeezed. However, this does nothing to support prices over time. It merely pulls forward potential buyers. The shorts buy into the asset now rather than later.

Short squeezes typically happen in assets that are in decline. After the squeeze, the decline continues unabated. A short squeeze is not a reason for optimism. Rather, the opposite. It indicates fundamental weakness in the asset. In the case of Bitcoin, we can see that there's been no increase in search interest due to the squeeze.

The squeeze itself only looks impressive in the short to medium term chart. However, it hardly registers in the six month chart. There's a long way to go before we're nearing previous highs, and the required conviction to get there doesn't appear to be present. With a great number of potential buyers now gone due to the squeeze, the outlook is bleak.

As for gold, nothing much is happening. We're back to $1800 per ounce, which is by now a key support level, together with $1750 and $1675. There's plenty of support, so gold remains a safe bet for those primarily concerned about wealth preservation. There's also plenty of upside potential. $2100 by the end of the year and $3000 some time next year still look feasible. Gold looks good from a risk reward perspective.

Whale

By Michaël CATANZARITI - by Michaël CATANZARITI, CC BY-SA 3.0, Link