Foresight Ventures: How to profit from shorting in the imitation coin marketForesight Ventures: Shorting the imitation coin market for profit.
Short selling is more likely to occur in small market cap or low trading volume altcoins. Especially in the high-leverage crypto market, continuous forced liquidation can cause a waterfall effect, resulting in more drastic price changes. Jonas, the author of Foresight Ventures, introduces several key indicators for short selling and explains how to profit from it.
Several key indicators for short selling transactions: 1) Funding rate of the contract: The premise of short selling is that the short position overwhelms the long position. Specifically, when the funding rate of a certain altcoin contract exceeds -0.1% (that is, the daily interest rate of short positions is 0.3%, and the annual interest rate exceeds 100%), it indicates that the short-term bearish sentiment is extreme. If it exceeds -0.75%, it will accelerate the rise further.
2) Contract open interest: The closer the contract open interest is to the circulating market value, and the closer the contract trading volume is to 50% of spot trading volume, the more likely a short squeeze will occur. If the open interest increases by more than 50% in the short term, it means that the main capital is entering. If the open interest decreases, it means that the main capital is retreating, and profit-taking is needed.
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3) Chip distribution: Applicable to manipulative short selling by market makers. The more concentrated the chip structure, the more extreme the market volatility.
The risks of short selling transactions: 1) Cryptocurrency exchanges may temporarily modify rules. 2) The value regression of altcoins. There is a commonly used indicator of a market top, which is the comparison of the spot (or contract) trading volume of the altcoin with the king of altcoins, ETH. From historical data, once the spot (or contract) trading volume of the altcoin exceeds or approaches ETH, it is likely to be a short-term emotional peak.
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