Battered and bruised, bitcoin investors aren’t throwing in the towel just yet.
That is according to data from DailyFX that shows nearly 80% of individual investors remain net invested, or long, in bitcoin — the highest level since November 2018. All this despite the best-known cryptocurrency trading near its 16-month low below $4,000.
“Bitcoin: Retail trader data shows 77.5% of traders are net long with the ratio of traders long to short at 3.44 to 1,” wrote Fan Xu, research analyst at DailyFX in a Jan. 2 research post. “The number of traders net long is 0.4% lower than yesterday and 6.2% higher from last week, while the number of traders net short is 2.7% lower than yesterday and 6.4% lower from last week.”
The last time the retail community was this long, a single bitcoin
was fetching around $5,500 and just before the break of $6,000, the retail community was 80% long, a mere 2.5% below current positioning levels.
So why the sudden turnaround? Maybe it’s the surge in the altcoins — coins other than bitcoin. Popular altcoins Ether
have rallied more than 50% from their mid-December lows and Bitcoin Cash
staged an impressive turnaround, trading from below $80 to $200 in five trading sessions in December.
In the past, market watchers have noted altcoins tend to lead rather than lag behind and outperform in crypto rallies, while underperforming in selloffs.
However, the team at DailyFX said positioning data are anything but indicative of future price movements. In fact, according to Xu, they are more likely to serve as a contraindicator.
“We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests bitcoin prices may continue to fall,” she wrote.
“Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger bitcoin-bearish contrarian trading bias.”
That is not a great outlook for crypto bulls in the long term.
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