In the recent period, the cryptocurrency market has witnessed a consistent downward trajectory in its market cap, driven by mounting fear and uncertainty.
In response to this prevailing sentiment, traders are seizing the opportunity to short their positions, capitalizing on the ongoing downturn, behavior analytics platform Santiment noted on August 16.
This shift toward bearish sentiment has sparked a chain reaction. Notably, when investors start to bet against the market, it escalates the possibility of liquidations, subsequently leading to a surge in prices, Santiment explained.
“When the crowd begins to bet against markets, it increases the likelihood of #liquidations, causing prices to rise.”
– Santiment wrote.
According to Santiment, the shorting of cryptocurrencies represents a long-awaited signal for bullish investors who are hoping that the market might be poised for a turnaround.
Short squeeze alert?
Santiment’s chart reveals increased shorting activity in several well-known cryptocurrencies, including THORChain (RUNE), VeChain (VET), The Sandbox (SAND), Kava (KAVA), Binance Coin (BNB), Axie Infinity (AXS), and more.
The growing short-funding rates suggest a high level of fear, uncertainty, and doubt (FUD). In such an environment, investors are more likely to liquidate their short positions, which could ultimately lead to a ‘short squeeze.’
As more short positions are liquidated, the demand for the cryptocurrency surges, driving its price even higher.
This chain reaction can create a self-perpetuating cycle of rising prices, as panicked short sellers rush to buy and close their positions, amplifying the overall upward momentum in the market.
Total crypto market cap loses $25 billion as fear takes over
Meanwhile, crypto prices have been trending significantly lower on August 17 due to a notable shift in market sentiment. To be more specific, ‘fear’ seems to be the prevailing emotion among crypto investors, replacing greed.
As a result, the global crypto market cap fell more than 2.1% over the past 24 hours, losing more than $25 billion in market cap, according to CoinGecko.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.