Market Psychology: When the Bears Are in Absolute Control

In the last 24 hours, derivative trading data has shown quite an "extreme" picture for some major coins:
- $AVAX: the short position ratio reaches 96.2% – almost all derivative funds are betting on a price decline.
- $ETH: the short ratio is 78.3%, indicating that the majority of traders believe Ethereum will struggle to maintain its current price.
- $BTC: the leading currency in the market also recorded 69.4% short positions, meaning nearly 7 out of 10 traders are leaning towards a bearish scenario.
👉 Why is this a notable signal?
In the derivatives market, a high short ratio not only reflects a pessimistic sentiment but also poses risks for the bears themselves. When too many people bet in one direction, especially on the downside, a short-term price increase can trigger a chain of liquidations (short squeeze). This causes a sharp price increase in the short term before the market returns to the dominant trend.
In other words:
• The bears are eagerly short selling in anticipation that the market will continue to fall.
• However, the bulls have a short-term counterattack opportunity, taking advantage of the over-leveraged shorts to push the price up, forcing a series of sell positions to close.
📈 Short-Term Scenario
• High probability: The market may experience a rapid upward movement in the short term, primarily to liquidate the accumulated short positions.
• Afterwards: If the buying power is not enough to sustain the upward momentum, the price may revert to a downward trend as expected by the majority.
👉 This may explain why, at the present stage, one should not be too excited about an unexpected pump, but neither should one go "all-in" with the bears when the position has become too crowded.