3 key metrics and the disinterest of professional traders point to a possible massive sale at the current Bitcoin price
Bitcoin’s price is looking for another yearly high, but professional traders refusing to open long positions is a downward sign.
For novice traders, the FOMO can be a heavy burden to bear. Resisting the temptation to buy Bitcoin (BTC) after a rise of almost 15%, in which the price broke through the $12,000 and $13,000 levels in less than 24 hours, is practically impossible.
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Professional traders are more experienced and know exactly how to play with these FOMO-inducing situations. As the data has shown, they were mostly opening short positions until October 20th, just before the price exceeded USD 12,000.
Aggregate Crypto Genius futures settlements. Source: Coinalyze.net
Most investors do not understand that being a professional trader does not mean that all emerging trends are profitably exploited. Instead, surviving when things go wrong is the true mark of success.
When Bitcoin shot up to $13,217, there were liquidations totaling $350 million, and the funding rate for futures contracts shows that there was no excessive short leverage.
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Perpetual contracts, also known as reverse swaps, have an insertion rate that is generally charged every eight hours. When the short ones are the most leveraged, the funding rate becomes negative. Therefore, those shorts will be the ones that pay the commissions.
Financing rate of Bitcoin’s perpetual contracts Source: Digital Assets Data
The graph above shows that such a situation has not occurred in recent weeks, at least not in a significant way. Therefore, despite selling before the price rise, major traders were not forced to divest themselves of their leveraged short positions.
The data shows that professional traders covered their short positions on October 21 and are staying away from making upward bets. This action is supported by both the long-shorts ratio of the major traders on the cryptoswaps and the premium on the futures contracts.
Professional traders covered their shorts but are not willing to bet on the long term
According to the relationship between long (buyers) and short (sellers) of Huobi, there are no signs of aggressive buying. The data indicates that major traders are not sure that the current trend is sustainable despite some hedging activity on their short positions.
Long/Short Ratio of Top Huobi Traders Source: Huobi
The relationship between long and short had remained relatively neutral until October 21. Suddenly, major traders decided to go short when BTC broke the USD 12,500 resistance. This morning, when BTC refused to lose ground, those traders began to hedge their short positions.
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Even so, for the moment, there are no signs of upward bets as Huobi’s latest data favouring long positions by 10% was produced more than two weeks ago.
As for the major OKEx traders, a similar pattern emerged, although short trading occurred before USD 12,000. This indicator remains in favor of short, a trend that emerged in mid-September and has continued ever since.
To confirm if there was a change in sentiment, one must be aware of the premium on futures contracts. Generally, these contracts are traded at a slight premium in healthy markets of any asset class.
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Bull markets will cause sellers of futures contracts to demand a higher price to postpone settlement rather than selling in the regular spot markets. If the current level of USD 13,000 managed to restore the upward momentum, this should be reflected in this indicator.
January futures contract premium. Source: Digital Assets Data
As Cointelegraph and Digital Assets Data show, the current premium of 1.8% matches the same level seen three weeks ago when Bitcoin was running at $11,500. This data is further proof that major traders aren’t confident about buying Bitcoin despite a 13% price increase since then.
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