Why are so many people shorting while the price keeps rising? What is the core reason behind this? Today, I will explain it to everyone. $ALPACA

Core Viewpoint: When trading, don't look at indicators; look at market depth.

This involves providing liquidity and consuming liquidity. Market makers (MM) are the ones who provide liquidity. They do not actively buy or sell; they do not care about rising or falling prices. Their job is to provide passive orders within a price range to be filled. They are the ones providing liquidity.

Retail traders' active buying and selling naturally become the ones consuming liquidity. Do people think that the market price is controlled by those who actively transact? This is completely wrong, and this is why so many people are shorting while the price cannot go down.

"The direction of this market is dictated by those providing liquidity."

How to understand this? Now let's assume that retail traders are actively buying and selling, which means consuming liquidity. If they short 10,000 contracts at 0.2 but only buy 1,000 contracts, many think the price should drop to 0.19 or 0.18 because there are more short sellers. But what is the actual situation? The market maker might place a buy order for 100,000 contracts at 0.2 to absorb the liquidity. They will absorb all your orders within a price level. If they absorb 10,000 contracts at 0.2, then they only need to go long 5,000 contracts, and the price will skyrocket. This is why when prices rise, there are many short sellers; they never intended for you to make money.

So when market depth is excessively unbalanced between longs and shorts, this is the typical strategy. Market makers do not need to actively make profits; they only need to trigger long stop losses and then short, and then trigger short stop losses and go long. In this rise and fall, your positions (for the vast majority of people) will be completely wiped out.