Key Takeaways
Are the BTC Bulls in Control?
A 3% recovery could be a bear trap rather than a sign of real demand on the spot market.
Should Traders Load Shorts?
With no dip buys in sight, opening shorts appear to be strategically important. Previous flash crashes have had V-shaped recoveries, but this jump is not yet guaranteed to turn into a full-blown rally.
Bitcoin from last week [BTC] dump reminded us where the real action is: derivatives. Coincidence or not, huge BTC shorts cashed out, reaping huge profits from BTC’s decline of almost 8% in less than 72 hours.
However, excessive greed works both ways. Actually Coinglass facts revealed that $620 million was wiped out in the last 24 hours, with shorts taking the biggest hit – accounting for roughly 67% of total liquidations.
And yet OG whales are still HODLing shorts. With that setup, another short squeeze could be happening as BTC gains momentum. The question is: will this jump remain a bear trap or turn into a breakout?
BTC is rebounding as the market calls Trump’s bluff
History tells us that flash crashes are the ultimate crash course for traders.
Even before Trump’s “Don’t worry about China” tweet, the market was calling the bluff. At Polymarkt, the chances of Chinese tariffs fell from 25% to 10%, showing that the market was pricing in a near-zero chance of escalation.
Trump’s truth social after later confirmed it and backed the market’s reading. The result? BTC managed to dodge a Q1-style flash crash when it fell nearly 30% as rates took effect globally.
Source: TradingView (BTC/USDT)
As a result, traders are now prices in another V-shaped rebound.
In April, when BTC fell 10% in less than 10 days on the “Liberation Day” FUD, the flash crash was followed by a clean V recovery as the crypto reclaimed the $82k range and raced to new highs soon after.
However, this setup did not repeat itself at August’s $124k ATH, when the price failed to recover its previous high. This time, a vertical recapture of $125,000 is critical. To do that, the cryptocurrency needs to show that this rebound isn’t just a short squeeze.
Will Bitcoin Bulls Flip the Script on Greed?
At the time of writing, BTC shorts appeared to be piling up, indicating signals that most traders may be missing.
With $117,000 the “winner” is whale who had $192 million in his bank account during the flash crash is back and has loaded a short position of $163 million with 10x leverage, with a liquidation price of $123,000. The position already amounts to $2.5 million in floating P&L.
However, is this just greed? According to Santiment, the top whales are bleeding out and dropping with zero-dip buying – a sign of caution for bulls. Simply put, the usual “buy the fear” game isn’t happening right now.
Source: Santiment
Against this setup, loading shorts can be smart.
With weak bid support, BTC’s 3% bounce could look more like a classic bear trap than real demand in the spot market, leaving weak hands in control. Until that happens, a V-shaped run to $125,000 will remain too far-fetched for now.