Short-term retail traders have been hoping for a rebound since last week’s market crash, as reflected in derivatives data from major exchanges. However, this optimism now faces a challenge as the economic recovery appears to be weaker than most expected.
What risks may retail traders face if they continue to pursue long positions? A recent report highlights several important points.
Individual traders increase their long positions in October, but will they be successful?
Retail investors maintain active long positions across major cryptocurrencies, according to a new report from Hyblock Capital. Currently, longs on Bitcoin (BTC), Ethereum (ETH), Solana (SOL), and HYPE range from 68% to 79%.
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Data from Coinglass supports this view. Binance’s long/short account ratio is 2.1 for BTC, 2.6 for ETH, 3.7 for SOL, and 2.0 for HYPE.
A high ratio means that there are more long accounts compared to short accounts. This suggests that many traders are expecting a V-shaped recovery in the market after the October 11 selloff.
However, the correlation between long ratio and price now indicates potential losses for retail traders. Data from Hyblock shows a strong negative correlation.
BTC: -0.93 ETH: -0.86 SOL: -0.87
In other words, as the long ratio increases, prices tend to fall, suggesting that retail longs may struggle as the market declines.
It looks like this pattern is already playing out. According to CoinGlass data, more than $1.1 billion in positions were recently liquidated, of which $873 million came from long trades.
“289,922 traders were liquidated in the past 24 hours, with a total liquidation amount of $1.11 billion,” Coinglass reported.
The market capitalization of cryptocurrencies continues to correct, falling below $3.6 trillion. As a result, the scale of liquidations may expand further. This surge in forced liquidations indicates that retailers’ optimism could quickly fade under continued selling pressure.
Excessive liquidations can deplete retail traders’ capital. Even if many altcoins fall to lower prices, there may not be any more funds to buy them back. This makes a V-shaped recovery less likely and the market is likely to remain volatile and range-bound at lower levels.
