Bitcoin: Are bears falling off the wayside?

Short positions fell over the last few days owing to BTC’s price surge.
Implied Volatility grew, which could make traders more cautious.

As Bitcoin’s [BTC] prices surged, optimism in the cryptocurrency sector soared as well. However, there was one segment that wasn’t happy with BTC’s rise – bears who had taken short positions on the king coin.

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Bears take a back seat

According to Datamish, Bitcoin’s short positions on Bitfinex recently reached their lowest levels in the year. At the same time, hedged short positions, which involve protecting against potential losses, have surpassed unhedged short positions.

This data suggested that those betting against Bitcoin’s price were becoming less active, possibly due to diminishing bearish sentiment in the market. This shift could indicate growing confidence in Bitcoin’s price prospects among traders.

Source: Datamish

Low correlation

The increasing positive sentiment surrounding Bitcoin can be attributed to its reduced correlation with NASDAQ, a major stock market index. This correlation between Bitcoin and the NASDAQ, which measures how they move together, was now at its lowest point since August 2021 at press time.

This movement meant that Bitcoin was becoming less dependent on the NASDAQ’s performance. As a result, traders may view Bitcoin as a more independent and potentially less risky investment, contributing to positive sentiment.

Bitcoin’s weekly correlation to the Nasdaq is the lowest that it’s been since August 2021 pic.twitter.com/MlKwwVqGMy

— Will Clemente (@WClementeIII) October 30, 2023

If Bitcoin’s price isn’t strongly influenced by the NASDAQ, it can offer a way to balance out a portfolio. For example, if stocks go down, Bitcoin might not follow the same path, which can help reduce overall risk.

Diversifying can protect against big losses in one part of your portfolio. A more diverse portfolio can be steadier over time.

So, if Bitcoin is less tied to the NASDAQ, it can be a tool for diversification, appealing to those looking for a mix of assets in their investments.

Rising Implied Volatility

Additionally, trade can be influenced by the Implied Volatility of Bitcoin as well. This metric measures how much the market thinks Bitcoin’s price might move.

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Recently, this Implied Volatility for Bitcoin surged. Thus, traders could choose to be more cautious or try to capitalize on the increased price movements. It can impact how they approach trading going forward.