Are Bitcoin bears dominant? Why is shorting BTC more advantageous now as risk aversion sentiment heats up?

Under the current macroeconomic and market sentiment intertwined backdrop, Bitcoin (BTC) is in a phase of high volatility and low certainty. Safe-haven sentiment continues to heat up, price directions fluctuate repeatedly, and key support levels are under test, making the market more dominated by short-term traders and leveraged funds. This oscillating structure, in fact, provides a more attractive risk-reward ratio for shorting Bitcoin.

From on-chain and derivatives data, Bitcoin’s estimated leverage ratio (ELR) has rebounded to around 0.22, indicating traders are re-adding leverage exposure and actively betting on short-term volatility. Lookonchain data further confirms this trend: a trader has been shorting BTC for seven consecutive days, with cumulative profits exceeding $22 million. This suggests that in an environment of tightening liquidity, short strategies are forming a self-reinforcing feedback loop.

On the macro level, conditions are also unfavorable for Bitcoin bulls. In the second half of December, multiple key economic events will be densely announced, including employment data and the Bank of Japan (BoJ) interest rate decisions, all of which could impact risk assets. Historical data shows that since 2024, every rate hike by the Bank of Japan has triggered a double-digit correction in Bitcoin. The current market widely expects the BoJ to raise interest rates by 25 basis points, which also explains why recent BTC short liquidity has increased significantly.

Technically, Bitcoin’s weekly price remains in the $88,000 to $91,000 range, seemingly entering a consolidation phase. However, the key question is: is this “bottom” more supported by spot buying or by speculative leveraged positions stacking up? CryptoQuant’s spot and derivatives trading volume ratio has fallen to about 0.1, a near three-month low, clearly indicating that derivatives trading is seriously dominating the market, while spot demand is noticeably lacking.

In other words, the core driver of Bitcoin’s current price is not genuine demand but leverage funds. Once macro risks materialize or sentiment reverses, highly leveraged longs are very likely to be liquidated, forming a typical long squeeze.

Overall, in the context of increasing macro uncertainty, tightening expectations for the Bank of Japan’s policy, and weak spot buying, Bitcoin shorts currently hold the advantage in both position structure and risk-reward ratio. For trading funds, cautious optimism or even following the trend to short BTC may be a more rational choice at this stage.