Traders Now Betting 2-to-1 Bitcoin Cash Fork Will Cause Price Decline

New data is offering insight into how crypto traders are pricing in a coming technical update to bitcoin cash, one that could cause the world's fourth most valuable blockchain to split into two competing networks.

At press time, there are now almost twice as many open short positions betting that the price of bitcoin cash will fall as there are longs betting its price will rise.

Still, while more margin traders believe in the possibility of a price decline, there's strong sentiment on both sides.

Short and long positions began to pile up on Nov. 2 when exchanges like Binance and Coinbase announced support for the upcoming fork.

From Nov. 2-7, the price of Bitcoin Cash spiked over 50 percent to reach a two-month high of $646 on Bitfinex.

Surges in price are usually met with a rise in short positions since the more significant the ascent in price, the more likely a pullback tends to become.

In this case, the recent surge in price combined with the upcoming fork created a perfect storm for a bearish trading environment.

The abundance of shorts may put bears at risk of a short squeeze should the price rise above its recent high.

If the price of an asset begins to rise to the point of a short no longer being profitable, those shorting will likely be caused to close, or cover, their position in order to avoid taking a further loss.

The act of closing an abundance of shorts can have a bullish impact on the market and cause a rapid price increase, known as a short squeeze, since the only way to close a short is to buy back the underlying asset.