7 months had passed in 2020 and all traders may have experienced mixed feelings. Various commodities have gone out of the V-shaped curve after experiencing a sharp decline and US stocks, gold, and other benchmarks have hit record highs.
Bitcoin investors’ depressed emotions accumulated for three months were finally released in these two days. Bitcoin began to rise all the way after 9500 USD, reaching a maximum of 12,000 USD, setting a new high for the year.
After Bitcoin returned to $10,000, some people believed that this was an irrational rise and called for bearishness. Before shorting Bitcoin, think first, why should you be short?
The basic logic of short selling bitcoin is that you think that the market price of bitcoin has risen to the top, that this upward trend is about to be reversed or that the price of the asset at this time is already at the high point of the historical cycle.
The shorting bitcoin is achieved by taking a short position in the derivatives trading platform. It means that the traders will gain profits when price drops.
Even if we refer directly to the data of the trading platform, the open interest of BitMEX Bitcoin futures contracts has been close to 1 billion U.S. dollars, which has returned to the level before the March 12 crash, and the Bitcoin price has returned to more than 10,000 U.S. dollars. But if you look at the world, the current Bitcoin is not the Bitcoin of March.
3 months of fluctuation
Recall that in the past three months, Bitcoin holders seem to have been on the run. Gold has reached a record high, silver has soared continuously, and US stocks represented by giants such as Tesla have also set new highs in succession.
The mainstream market, even China Shanghai Stock market has rushed to 3,400 points. Looking at the cryptocurrency industry, there is almost no movement. From the perspective of the industry, the DeFi field is indeed very lively, but this is not a traffic portal outside the industry.
DeFi is now innovating anyway, as long as the threshold and funds are used. If the threshold remains high, it will not attract large traffic.
Is the market value of Bitcoin too high? The market value of 9,000 US dollars Bitcoin is about 180 billion US dollars, which may not be considered a high market value compared with some stocks. In mid-June, Tesla's share price exceeded $1,000, which has already broken the previous high, with a market value of over $190 billion, but this is not the end. Hot money and retail Fomo has doubled Tesla's stock price.
For a long time, the attention of capitals was not in the crypto industry at all. Bitcoin actually has small fluctuations during this period and is expected to welcome continuous attention.
It’s only lag not never
Bitcoin's rise has a serious lag. In this bull market dominated by the technology sector, all the leading technology targets have already risen.
In the past three months, chip leader TSMC has risen from NT$300 to NT$430, new energy leader Tesla has risen from US$700 to a maximum of US$1900, space travel leader Virgin Galactic has risen from US$15 to US$27, and artificial meat leader Beyond Meat rose from US$90 to a maximum of US$160. The technology sector led by these leading stocks is the leader in this rare global secondary market bull market in history.
In the blockchain industry, which also belongs to the technology sector, the leading target is undeniably Bitcoin, but compared to the stocks mentioned above, there was no obvious increase.
Do you want to short Bitcoin
When Bitcoin returns to $10,000, does it mean that Bitcoin should be shorted?
There is an old saying in the secondary market, “The best thing to make in the market is emotional money, followed by technical analysis, and then fundamentals.” Let’s look at the global market again. Everything is different from March.
The unprecedented release of global central banks has formed a new round of wealth distribution. A large number of funds have chosen technology sectors and gold as safe-haven assets. All technology leaders are either on the way to new highs or on their way to new highs.
In other words, we may be experiencing a technology bubble.
Hot money chose the technology sector as the place for their capital, which created a bull market in the technology industry, just as they chose the Internet industry 20 years ago and caused the Internet bubble.
Is the valuation of the technology sector high now? Very high. Even Tesla founder Elon Musk himself said on Twitter that Tesla’s stock price was too high.
At the time, Tesla was only $700. After he issued this warning, Tesla’s stock still has risen to 1900 US dollars. The founder himself knew this was abnormal, but he couldn't stop it.
Now, the emotion that Bitcoin has been brewing for three months has been pulled up. All the fundamentals of Bitcoin have not changed and the only change is that the water finally flows into the Bitcoin fields, giving people the opportunity to harvest.
It is not to recommend everyone to buy Bitcoin since the side of the market is still pretty vague at this stage, but I do suggest everyone not to blindly short because short selling is likely to be against potential trends.
The technology bubble has taken shape, and there is a high probability that Bitcoin is already in this bubble. At this time, we can do nothing and wait for the market sentiment to provide a more crystal clear trend. It is never too late.