Peter R
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March 04, 2014, 07:42:10 AM

shorts on bfx are pushing down hard now.  that means there's gonna be a squeeze.

could you dumb that down a bit for those of us who are unfamiliar with leverage and options?

seriously, bitcoin is the first time I have ever traded anything.

if 'shorts' are pushing down, does the 'squeeze' mean price spikes down? or up?

I really don't get this Huh

Traders are borrowing coins on margin from Bitfinex and selling them into the market.   These traders hope to buy them back cheaper in the future, return the borrowed coins, and pocket the difference.  "Pushing down hard" means traders are borrowing additional coins and selling them into the market, thereby helping to push down the price.   

There are presently 8,116 BTC on loan to short traders at Bitfinex.  These traders are paying on average 27% per year in BTC to borrow them, and at some point in time they will buy them back because they aren't theirs to keep.  If the price goes up instead of down, some may chose to buy back to minimize their loss, thereby adding fuel to the rally.  At this point, other short traders may be running out of margin (they now have insufficient collateral to cover their mark-to-market losses on their short position) and Bitfinex will force them to cover, squeezing people out of their positions.