Bitcoin (BTC) has fallen 14% in the last 24 hours and tested $ 32,000 support for the fifth time this year. Traders will probably be more concerned as the price dropped to $ 31,050, but at the time of writing the 4-hour chart shows that sales may decline.
Short-term charts currently show that Bitcoin is still flirting with bearish territory, but a number of derivative indicators and the flow of large traders are changing neutral to bullish.
Bitcoin recently fell three times to below $ 32,000, followed by a big jump of 30%. The data show that large OKEx traders are actively buying in the downturn, while the futures premium remains in an optimistic range.
Although traders bought this current low, the sharp fall of 4200 dollars has caused serious damage to some investors. The fall to $ 31,270 was followed by sales of $ 460 million in derivatives. Interestingly, this only happened when open interest in BTC futures reached $ 13.1 billion.
Today’s price action may sound alarming, but it pales in comparison to the 24% collapse on January 10, which wiped out $ 1.5 billion from long-term contracts.
Veteran traders are more accustomed to Bitcoin’s 120% annual fluctuations, so 12% price fluctuations are not particularly frightening. In fact, large traders and arbitrage owners have remained relatively calm during the downturn.
To understand whether Bitcoin gives bearish signals or not, traders can analyze the relationship between long and short traders on cryptocurrency exchanges, premium futures and skewed options.
Long positions OKEx 2.5 times more shorts
The data from the stock exchange sheds light on the position of traders in the long and short term. By immediately analyzing the position of each client, as well as fixed and future contracts, you can get a clearer idea of whether professional traders are leaning towards the positive or negative side.
That said, there are occasional differences in methodologies between different exchanges, so viewers should keep an eye out for changes, not absolute numbers.
Top traders OKEx have increased for a long time since 19 January, bringing the index up from 0.96 (small net sales) to a long 2.49 ratio. This is the highest reading of 30 days and indicates an unusually severe imbalance.
On the other hand, Huobi’s top retailers had an average of 0.91 buy-to-sell ratios over the last 30 days, with a preference for pure cards of 9%. On January 20, they increased their short net positions to 0.86, but bought them back as Bitcoin plunged in the early hours of January 21. Consequently, they returned to their monthly average of 0.91 from buy to sell.
Finally, the best Binance traders averaged 21% preferred long positions over the last 30 days. These traders seem to have started to wind down as their long net positions were cut to 1.02 from 1.18 at the end of January 20th. According to Coinalyze, 40% of all long-term Bitcoin settlements took place in the last 24 hours on Binance. …
Future premiums increased
Professional traders tend to dominate long-term futures contracts with specific expiration dates. By measuring the gap in costs between a futures contract and the regular spot market, a trader can determine the level of an upward trend in the market.
Typically, 3-month futures contracts must be traded at an annual premium of 6% to 20% (basis) over conventional spot exchanges. When this indicator turns off or becomes negative, there is an alarming red flag. This situation is called bearish and indicates that the market is in a downward trend.
On the other hand, a stable base of more than 20% indicates excessive influence from buyers, leading to the possibility of massive liquidations and ultimately market crashes.
The graph above shows that the index has fluctuated between 3.5% and 5.5% since 13 December, which represents a moderate growth of 19% year over year. Meanwhile, the latest peak of 6.5% corresponds to an annual premium of 29%, which indicates an increase in shoppers’ influence.
While this is not the exact cause of the current correction, market makers and arbitration agencies know exactly how to handle this situation. A fall in prices is likely to lead to a massive liquidation, and it should also be noted that open interest in futures has just reached its full-time high.
BTC’s contract premium in March has now stabilized at around 2.5%, which corresponds to 14% from year to year.