As the price of Bitcoin has risen over the past few weeks, short positions on Bitcoin have begun to decrease. Bitcoin's correlation with the Nasdaq has declined, making it a hedge against market uncertainty.
As Bitcoin price surged, short positions have declined over the past few days.
Implied volatility has risen, which could make traders more cautious.
As the price of Bitcoin soared, so did the optimism in the cryptocurrency industry. However, there was a group of people who were not happy with the rise of Bitcoin - they took a short position in Bitcoin.
Bears take a back seat
According to Datamish, short positions in Bitcoin on Bitfinex recently hit their lowest level this year. Meanwhile, hedged short positions, which involve protection against potential losses, have surpassed unhedged short positions.
The data suggests that those who are shorting the price of Bitcoin have become less active, possibly due to a reduction in bearish sentiment in the market. This shift could indicate traders’ growing confidence in the outlook for Bitcoin’s price.
Source: Datamish
Low correlation
The growing positive sentiment surrounding Bitcoin can be attributed to its decreasing correlation with the major stock market index, the Nasdaq. At press time, this correlation between Bitcoin and the Nasdaq, a measure of how they move together, is currently at its lowest point since August 2021.
This move means Bitcoin is becoming less dependent on the performance of the Nasdaq. As a result, traders may view Bitcoin as a more independent and potentially lower-risk investment, helping to boost positive sentiment.
If the price of Bitcoin is not as strongly influenced by the Nasdaq, it could provide a way to balance a portfolio. For example, if stocks fall, Bitcoin may not follow the same path, which could help reduce overall risk.
Diversification protects against large losses in one part of your portfolio. A more diversified portfolio will be more stable over time.
Therefore, if Bitcoin is less tied to the Nasdaq, it could serve as a diversification tool, appealing to those seeking a mix of assets in their investments.
Implied volatility rises
Additionally, trading can also be affected by Bitcoin’s implied volatility. This metric measures how much the market thinks the price of Bitcoin is likely to move. Recently, Bitcoin’s implied volatility has spiked. Therefore, traders can choose to be more cautious or try to take advantage of a price increase. This could affect how they trade in the future.
Source: The Block
At press time, BTC is trading at $34,406.07. BTC price is down 0.35% in the past 24 hours
