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Bitcoin Derivatives Trading Futures Friday

Bitcoin futures data shows retail is getting on board in case price takes off

2021.08.06 Hunain Naseer

After a week in the green, BTC attracts retail traders looking for a breakout.

In last week’s edition of Futures Friday, we highlighted Bitcoin’s surge toward the 40,000 USDT resistance level and the absence of retail longs in that rally. Since then, the leading digital currency has posted a high just above 42,500 USDT before dropping as low as 37,307 USDT yesterday. Currently, BTC is back above 40,000 USDT, as per OKEx BTC/USDT price.

From here, Bitcoin needs to post a quick break upward in order for any major sentiment shift to happen. Given how there hasn’t been any real consolidation around this level in the past, it is likely that BTC will soon have to pick a direction either way.

Looking at futures contracts, the current quarterly contract, BTCUSD0924, which expires at the end of September, is trading at $40,600, with a premium of around $240 over spot BTC. Last week, the premium was around $290. Meanwhile, BTCUSD1231, which expires in December, is trading at $41,570, with a premium of around $1,170 — marginally below last week’s $1,200 or so.

The BTC spot price has been relatively more volatile in the last seven days, breaching 40,000 USDT on Saturday before dropping below again on Monday and remaining under that level all the way to Thursday. Only today have we seen a small recovery in price with a daily gain of over 4%, as of the time of this writing.

OKEx BTC spot price on Aug. 6, 2021, with blue arrows marking Fridays. Source: OKEx, TradingView

OKEx trading data readings

Visit OKEx’s trading data page to explore more indicators. The charts below have orange circles marking their positions in the previous week for comparison.

BTC long/short ratio shows retail is expecting upside

After last Friday’s long/short ratio running opposite to the price, we finally see retail joining the action this week and going long.

In fact, the ratio peaked on Aug. 4, at around 1.38, and then posted a high of 1.33 on Aug. 5 — days when BTC was trading at seven-day lows. This trend shows retail’s growing confidence in Bitcoin’s upside, especially when we compare it to last Friday’s ratio of 1.05.

The ratio currently stands at around 1.24, which is the same as it was on July 18, when BTC was trading around 31,000 USDT. Once again, this is a positive sign, and we could see retail interest push BTC higher from these levels.

BTC futures long/short ratio on OKEx

The long/short ratio compares the total number of users opening long positions versus those opening short positions. The ratio is compiled from all futures and perpetual swaps, and the long/short side of a user is determined by their net position in BTC.

In the derivatives market, whenever a long position is opened, it is balanced by a short position. The total number of long positions must be equal to the total number of short positions. When the ratio is low, it indicates that more people are holding shorts.

BTC basis shows market is not overly optimistic

The basis for the quarterly contract is around $240 at the moment, but it went as high as $408 earlier in the week, compared to last week’s $382 peak. 

This premium is not high at all but is more bullish than back in January when BTC was trading around $40,600 with a premium of $166.

The reason for the current trend is the market’s uncertainty due to Bitcoin’s lack of trend-defying moves. The market is cautiously optimistic and afraid of going overly bullish on Bitcoin without any major developments.

BTC quarterly futures contract basis on OKEx

This indicator shows the quarterly futures price, spot index price and also the basis difference. The basis of a particular time equals the quarterly futures price minus the spot index price.

The price of futures reflects the traders’ expectations of the price of Bitcoin. When the basis is positive, it indicates that the market is bullish. When the basis is negative, it indicates that the market is bearish.

The basis of quarterly futures can better indicate the long-term market trend. When the basis is high (either positive or negative), it means there’s more room for arbitrage.

Open interest continues to grow

The open interest, after a prolonged downturn, started showing improvements in the last couple of weeks and has continued to grow this week too, albeit not too dramatically.

As highlighted in previous editions of Futures Friday, each Friday marks a sharp drop in the OI because of the weekly futures expiring. This drop is usually temporary and followed by a recovery as new positions open. This week, the trend continued to remain positive, with marginal growth from last week’s low of $1.37 billion to today’s low of $1.38 billion.

With the long/short ratio also rising in the week and the OI generally staying above $1.4 billion, it can be inferred that retail longs have been more confident this week.

BTC futures open interest and volume on OKEx

Open interest is the total number of outstanding futures/swaps that have not been closed on a given day.

Trading volume is the total trading volume of futures and perpetual swaps over a specific period of time.

If there are 2,000 long contracts and 2,000 short contracts opened, the open interest will be 2,000. If the trading volume surges and the open interest decreases in a short period of time, it may indicate that a lot of positions are closed, or were forced to liquidate. If both the trading volume and open interest increase, it indicates that a lot of positions have opened.

OKEx Insights presents market analyses, in-depth features and curated news from crypto professionals.

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Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involve significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.



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