- Retail shorts are rising fast, setting the stage for a potential Bitcoin short squeeze.
- Historical patterns showed that bearish sentiment often precedes upside moves when traders get caught offside.
Bears are piling in… just as Bitcoin [BTC] starts to climb.
In a classic twist, retail traders are ramping up short positions, betting against the rally. But history suggests this crowd may once again be early victims of a squeeze.
As bearish sentiment peaks, the stage could be set for yet another painful upside surprise.
Retail shorts on the rise
The Leveraged Traders’ Sentiment indicator, which combines Funding Rates and Long/Short Ratios by position and account, is flashing a strong contrarian signal.
Source: Alphractal
Retail traders are betting against Bitcoin, with short positions surging despite the price rising.
The chart shows bearish sentiment (blue line) dipping as BTC rallies, highlighting a potential market imbalance.
Historically, overcrowded short trades often lead to sharp reversals, not due to consensus, but as the market punishes extreme positioning.
Crowd shorts rarely win
This isn’t the first time retail traders have bet against the trend… and lost.
In May, a similar sentiment shift unfolded as retail short positions surged, only to be liquidated, triggering a fast-paced rally.
Now, bearish positioning is growing more aggressive, even as Bitcoin’s price holds strong. This pattern closely resembles the earlier setup, suggesting another potential short squeeze.
If overleveraged shorts remain on the wrong side of the trade, another rapid price surge could follow.
