How long does digital currency short selling generally last?

The duration of a digital currency short sell decline varies depending on market conditions, short seller strategies and market sentiment, and can range from hours to years. The duration of the decline is shorter in the bull market and longer in the bear market; the holding time and leverage of short sellers will affect the duration; market emotions such as fear and panic, greed and optimism will also affect the downward trend. Specific examples include Bitcoin’s multi-month decline from $19,000 to below $3,000 in 2018, and the overall market decline that lasted for several months after the collapse of the Terra ecosystem in 2022.

How long does a short-selling decline in digital currencies generally last?

The duration of a short-selling decline in digital currencies depends on a variety of factors, including market conditions, short-seller strategies, and market sentiment.

Market conditions

• Bull market: In a bull market, market sentiment is optimistic and prices are generally in an upward trend. Short sellers may have difficulty maintaining short positions because the market trend may reverse, causing prices to rise.
• Bear market: In a bear market, market sentiment is pessimistic and prices are generally in a downward trend. Short sellers may find it easier to maintain short positions as the market trend may continue to decline.

Short Seller’s Strategy

• Hold Time: The longer a short seller holds, the longer the decline is likely to last.
• Leverage: Using leverage can magnify gains, but it also increases risk and the amount of loss. High leverage can force short sellers to close their positions at a loss, causing downward trends to accelerate.
• Closing conditions: The closing conditions (such as stop loss or target price) set by short sellers in advance also affect the duration of the decline.

Market Sentiment

• Fear and Panic: When market sentiment is in a state of fear and panic, investors may sell their digital currencies, causing prices to plummet.
• Greed and Optimism: When market sentiment is in a greedy and optimistic state, investors may buy more digital currencies, pushing up prices.

General Duration

Based on the above factors, the duration of a digital currency short sell decline can range from a few hours to a few months. In extreme cases, declines can even last for years.

Specific Case

In 2018, Bitcoin experienced a major sell-off, falling from $19,000 to below $3,000. This decline lasted for several months and ended only in 2019 when market sentiment improved.

In 2022, after the collapse of the Terra ecosystem, the digital currency market fell as a whole. Some digital currencies, such as Bitcoin and Ethereum, are down more than 50%. This decline has been going on for months, and it's unclear when it will end.

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