Bitcoin (BTC), which dropped to $40,000. This is a critical level that erases the gains made in the past three weeks, when it peaked at $48,200.
Analysts believe that the reductions in US Federal Reserve balance sheets are adding pressure on stocks and risk assets. Bitcoin is expected to lose its appeal.
Filbfilb, the founder of Decentrader, agreed with these strong headwinds and argued that the Fed’s actions could have an impact on the BTC price trend for months to come.
Bitcoin was not happy about a rising dollar. The U.S. currency index (DXY), which measures the value of the dollar in dollars, returned above 100 for its first time since May 2020. Although some people consider the DXY event to be a temporary sign of strength, it had a clear impact on crypto markets.
Data shows that margin traders are bullish
Margin trading allows investors borrow cryptocurrency to leverage their trading positions with the hope that they will earn higher returns. Tether (USDT), which can be borrowed by traders, can be used to open a leveraged position. However, Bitcoin borrowers cannot short the cryptocurrency as they are betting on it falling. Contrary to futures contracts, the balance of margin longs and shorters is not always equal.
OKEx USDT/BTC margin lending ratio. Source: OKEx
The chart above shows that traders have borrowed more USDT in recent months. This is evident by the rising ratio from 9.6 on April 8, to 15.9 now, which is the highest level for two months.
The indicator still favored stablecoin borrowing, even though margin lending was at 5 on March 28.
A margin lending ratio lower than 3 is considered unfavorable because crypto traders tend to be bullish. The current level is positive, but less confident than the week before.
Related: Bitcoin continues to fall as former BitMEX CEO sets $30K BTC price goal for June
The ratio of long-to-short is slightly bearish
Externalities that could have had an impact on the longer-term futures instruments are not included in the long-to-short net ratio of top traders. Analyzing these positions on spot, perpetual, and futures contracts will help you to understand whether professional traders lean bullish or bearish.
Sometimes there are methodological differences between exchanges. Therefore, viewers should pay attention to changes and not absolute numbers.
Exchanges’ top traders Bitcoin long-to-short ratio. Source: Coinglass
Professional traders have reduced their bullish long positions (except for a short spike in OKX’s Bitcoin-to-short ratio) since March 31. This is in direct contrast to the margin trading markets that showed significant sentiment improvement during the first week.
What could have caused this distortion? Most likely, Bitcoin’s price is down 32% over the past 12 months. Futures traders weren’t ready to take on bullish positions with leverage even though BTC was close to $48,000 as of March 29.
You can have a “glass half-full” reading of the same data, as Bitcoin prices dropped 15% since March 29th. However, there are no signs of bearishness in the margin or futures trading. The traders, from the standpoint of derivatives, are safe but still optimistic that Bitcoin will rise to $50,000 or higher in the short term.
Risk is inherent in every investment or trading move. Before making any investment or trading move, you should do your research.