Many cryptocurrency traders have encountered this 'counterintuitive' scenario: when they open the futures trading software, the number of short positions clearly exceeds the number of long positions, and the screen is filled with 'bearish' sentiments, yet the price of the coin not only does not drop but instead continues to fluctuate upwards. This is not a case of market 'failure', but rather the result of 5 key logics that most people overlook.
First, the 'high number of short positions' may be a data trap. Most people look at 'order quantity' but overlook 'capital volume' - for example, 100 retail investors each open a 1U short position, totaling 100U in short positions, but as long as 1 main force opens a 500U long position, they can easily absorb these shorts. Especially in a bull market, the main force often utilizes the sentiment of 'retail investors clustering in short positions' to prop up the price and trigger short stop-loss orders, and these stop-loss orders automatically convert into long positions, further pushing up the price and creating a 'short squeeze'.
Secondly, the main force is deliberately 'fishing for shorts'. When the price of a coin is at a key support level, the main force may first crash the market to create the illusion of a 'breakdown', attracting retail investors to follow suit and short; once the open short positions accumulate to a certain scale, they suddenly release a large amount of spot buying to push the price up, while also closing their short positions and opening long positions in the futures market, profiting from both ends. This kind of operation is more common in small-cap coins. For example, a certain coin seems to have a 'high market cap', and retail investors rush to short, but they don’t realize that the main force has locked up most of the circulating supply through on-chain chips, allowing a small amount of capital to drive the price.
Furthermore, positive fundamentals outweigh the short-term pressure from short positions. If the market suddenly encounters favorable policy news (such as compliance announcements) or institutional participation (such as increased ETF holdings) and other strong driving events, even if there are numerous short positions in the short-term futures market, the buying in the spot market will dominate the trend. For instance, prior to the approval of Bitcoin ETFs, many retail investors shorted out of 'concern for a pullback after good news', yet institutions continued to increase their spot holdings, ultimately pushing the price to break past previous highs, leading to a collective liquidation of short positions.
Another easily overlooked point: the 'time dimension difference' in the futures market. Many short positions are for short-term contracts (such as 4 hours, 12 hours), while price increases may be part of a medium to long-term trend. For example, if a certain coin is in the mid-phase of a bull market, retail investors may short during a short-term pullback, betting on 'continued decline', but medium to long-term bullish capital is still continuously entering the market. Once the short-term short positions expire and are closed, the price will return to an upward trajectory.
Finally, an imbalance in leverage exacerbates the upward inertia. When the number of short positions is excessive, the overall market's short leverage ratio will skyrocket, and once the price experiences a slight increase, it will trigger a large number of 'passive stop-loss shorts'. These stop-loss orders are essentially 'forced longs', which will create a chain reaction - a slight increase → stop-loss of a batch of shorts → price rises again → another batch of stop-losses, ultimately turning what was originally a mild increase into a 'squeeze-induced surge'.
Ultimately, the 'long-short ratio' in the futures market is only a superficial signal; what truly determines the price is the strength of capital, the direction of the trend, and the logic of fundamentals. For ordinary traders, rather than focusing on the 'full screen of short positions' to follow the trend, it is better to pay more attention to 3 core factors: first, the concentration of on-chain chips (to avoid coins controlled by the main force), second, the trading volume in the spot market (to gauge the real strength of buying), and third, their own leverage ratio (to reduce positions in a timely manner when short positions are excessive, to avoid being forced to cover). After all, in the cryptocurrency market, one should never use 'retail investor thinking' to counter 'main capital + trend', nor should one regard short-term futures long-short data as the sole standard for judging long-term trends.
Risk warning: Futures trading has a strong leverage attribute, and the above analysis does not constitute investment advice. Operations should be combined with one's own risk tolerance to avoid blindly following the trend.
