The $4,700 rally in Bitcoin (BTC) price on November 29 may have been a huge relief to coin holders, but based on the derived numbers, it’s too early to talk about a day.
This should come as no surprise as the price of Bitcoin is still 15% below its all-time high of $69,000 set on November 10. Just 15 days later, the cryptocurrency tested its support at $53,500 after a sharp 22% correction.
Today’s trend reversal may be due to MicroStrategy announcing a purchase of 7,002 bitcoins on Monday at an average price of $59,187 per coin. The company raised funds by selling 571,001 shares between October 1 and November 29, and raised $414.4 million in cash.
More positive news emerged after German stock market operator Deutsche Boerse announced the listing of the Invesco Physical Bitcoin Bond, or ETN, an exchange-traded bond. The new product will be listed under the symbol BTIC on the digital exchange Deutsche Boerse Xetra.
The data shows that professional traders remain neutral optimists.
To understand how professional traders are in an uptrend or downtrend, one must analyze the return of the underlying futures contracts. This index is also known as futures premium and measures the difference between futures contracts and the current spot market on traditional exchanges.
Quarterly Bitcoin futures contracts are the preferred tool for whale charts and arbitrage. While derivatives may seem cumbersome to retail traders due to settlement dates and price differences compared to the spot markets, the most notable feature is the lack of volatile funding rates.
Base price of 3-month bitcoin futures contract. Source: Laevitas.ch
Three-month futures contracts are usually traded at an annual premium of 5-15%, which is an alternative cost to arbitrage trading. By postponing settlement, sellers demand a higher price, and this leads to a difference in price.
Notice the 9% low on November 27 when Bitcoin tested the support at $56,500. Then, after rising above $58,000 on Monday, the index returned to a healthy 12%. Even with this movement, there are no signs of nervousness, but none of the past few weeks can be considered bearish.
On the topic: Fundamental data indicates that the short-term correction of the cryptocurrency market is over.
Credit markets provide additional information
Margin trading allows investors to borrow cryptocurrencies to leverage their trading position and thus increase profits. For example, you can buy Bitcoin by borrowing Tether (USDT), thus increasing your risk. On the other hand, bitcoin loans can only be used for short selling or price betting.
Unlike futures contracts, there is no need to balance long and short margin contracts.
OKEx USDT/BTC Margin Lending Ratio. Source: OKEx
When the lending rate is high, this indicates that the market is bullish – conversely, a low lending rate indicates that the market is in a downtrend.
The above chart shows that traders borrowed more bitcoins in the past as this ratio has fallen from 21.9 on November 26 to 11.3 today. But in absolute terms, the data tends to be bullish as the index largely promotes stablecoin loans.
Derivatives data shows zero nervousness from professional traders, even though bitcoin is up 9% from its low of $53,400 on November 28. Unlike retail traders, these well-informed whales are avoiding FOMO, even though the margin lending index is showing signs of over-optimism.