Bitcoin (BTC) has struggled to maintain the $ 55,000 support level over the past 16 days, or essentially since the record close out of $ 5 billion long contracts on April 17. The rejection that took place after the all-time high of $ 64,900 had a devastating impact on sentiment among retail traders, as measured by the significant drop in the funding rate for perpetual futures.
However, despite Bitcoin’s recent underperformance and the current 6.5% drop, professional traders have been buying the drop for 24 hours. These whale and arbitrage bureau movements are reflected in the long / short ratio of OKEx futures contracts, as well as in Bitfinex’s margin lending markets. When this purchase occurs, retail traders are mostly calm, which is reflected in the perpetual neutral funding rate.
As noted above, the 8 hour funding rate for perpetual futures contracts (reverse swaps) has been below 0.05% in the past two weeks. For month-end contracts, prices differ significantly from regular spot trades, reflecting the imbalance of long and short leverage.
This spread is the reason retail traders tend to prefer perpetual futures, even though carry costs vary due to changes in funding rates.
The current 8 hour rate equates to a 1% weekly rate, signaling a slight imbalance on longs. However, this level is well below the 0.10% and higher rates observed in early April. This data is clear evidence that retail traders are uncomfortable adding Bitcoin long positions despite the 9% correction in two days.
On the other hand, the long-short indicator of top traders hit its highest level in 30 days, signaling buying activity from whales and arbitrage bureaus. This indicator is calculated by analyzing the client’s consolidated position on spot, perpetual and futures contracts. As a result, it gives a clearer view of the upward or downward trend of professional traders.
As noted above, the current bid / ask ratio of OKEx futures contracts currently favors long positions by 94%. This buying activity was launched in the early hours of May 4, when Bitcoin fell below $ 55,000. More importantly, it signals even more confidence than on April 14, when BTC hit its all-time high of $ 64,900.
However, to confirm whether this movement is widespread, one should also assess the margin markets. For example, the main exchange (Bitfinex) holds over $ 1.8 billion in leveraged Bitcoin positions.
Bitfinex is showing dramatic growth in BTC margin markets with buyers over 50 times the amount borrowed by shorts. These levels are unprecedented in the history of the stock market and confirm OKEx’s futures data.
There is no doubt that professional traders are ultra bullish despite the current decline in Bitcoin. When it comes to retail traders’ lack of appetite, they currently seem to be focusing on altcoins.
Currently, 18 of the top 50 altcoins have earned 45% or more in the past 30 days.
The question is, can the altcoin rally continue if BTC fails to produce a new all-time high in the next two weeks?
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of TBEN. Every investment and trading move involves risk. You need to do your own research when making a decision.