Bitcoin Long is Overcrowded TradeSentiment is king in much of crypto and foreign exchange trading. This is mainly due to the fact that hedge funds, banks, and other financial institutions own all of the data on trader's positions and then can leverage that data by betting against the trend or the crowd to profit handsomely. Data from IG though can now give us a window into crowd sentiment. If you take a look at Daily FX's Bitcoin sentiment index, you can find that 79 percent of clients of about 1200 in total polled are net long on Bitcoin. However, they still weight this as a bullish signal due to the change in sentiment being that less traders are net long now than what they were last week. Because the weight changes as time progresses, this may change. I suspect given the positive sentiment that this indicator will eventually flash bearish.
I also have picked a few technicals to back this view up that the trend is shifting bearish. First, almost a dozen exponential moving averages from 25 day to 90 day are now in the red. Moreover, the awesome oscillator and MACD also suggest the tides are turning. Even though this is the case, it is not necessarily a shoe in. Bitcoin price action could move on a dime as it tends to succumb to dramatic price fluctuations over a very short period of time increasing the standard deviation of price, increasing beta, or in other words increasing risk.
In short, my bias has always been to short Bitcoin. Sentiment and a few technicals now just provides further evidence for this. If you would like to take a look at the Daily FX sentiment index, you can find it here: www.dailyfx.com and if you would like to take a look at any more of my analysis in longer form, you can check out my website at www.anthonylaurence.wordpress.com
