When Bitcoin drops, traders shorting it have to buy back their borrowed coins to lock in profits, creating buying pressure that reverses the decline. Kosta Ouzas walks through how this mechanic plays out in recent price action.
The reason price bounces after long liquidations is because all the people that are going short, that are in profit, for them to actually realize profit on their positions. People may not realize this, but when you take a short position, you actually borrow the asset from the exchange. And the only way to realize profit is to buy the underlying asset back, which is what's called a short squeeze for that. For anyone that wants to understand, this is why price pumps up. Now, what's actually been happening, clear market structure. So let's have a look at this first low here, right?
