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Bitcoin Derivatives Trading Futures Friday

Bitcoin futures data shows retail bulls haven’t given up just yet

2021.09.24 Hunain Naseer

Despite the fact that BTC has continued to slide this month, futures data shows that bulls aren't giving up so quickly.

In last week's edition of Futures Friday, we discussed how retail traders appeared to be cautious in the near term despite long-term optimism in the market. Since then, a mix of macro and technical factors caused BTC to drop from a high of 48,822 USDT last Saturday to a low of 39,566 USDT this Wednesday. The market leader is trading at 42,112 USDT per the OKEx BTC/USDT price at the time of writing.

Looking at Bitcoin futures contracts, the contract BTCUSD0924 expired today and has been replaced by BTCUSD1231 as the next quarterly contract while the new contract BTCUSD0325 is set to expire after six months from now.

The BTCUSD1231 contract, which expires in December this year, is trading at $42,900 with a premium of just over $700 — notably lower than the quarterly premiums we saw in previous weeks. Meanwhile, the BTCUSD0325 contract, expiring in March next year, is trading at $42,713 with a premium of nearly $1,600.

This week's price slide has definitely dampened mid-term projections, where the contract expiring in December has lost more than half its premium.

OKEx BTC spot price on Sept. 24, with blue arrows marking Fridays. Source: OKEx, TradingView

OKEx trading data readings

Below we take a look at several indicators to better understand market sentiment. You can visit OKEx's trading data page to explore more indicators.

BTC long/short ratio shows bulls still hanging around

The long/short ratio in September has largely shown cautious optimism from retail traders. Last Friday, the ratio stood around 1.03 and is around 0.90 today despite the price slide.

The ratio had peaked on Sept. 20 this week, hitting 1.24 as BTC fell sharply from around 48,000 USDT to 42,500 USDT levels. However, sustained downward momentum from that point resulted in longs being closed as BTC continued to fall for another two days.

While it is typical to see long positions declining during market slides, what is notable here is that the long/short ratio today is still higher than August lows — when BTC was trading fairly higher.

BTC futures long/short ratio on OKEx with markings highlighting historic values

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 succumbs to persistent price drops

The basis, or premium, for the BTC contract expiring in December had largely stayed above $1,000 in the last few weeks but is down to $700 this week as BTC struggles to stay above 40,000 USDT levels.

Even the March 2022 contract is not overly optimistic with a premium of around $1,600, which was, until last month, the premium for the December contract.

What this implies is that the market has reigned in any major bullish projections in light of this month's price action.

BTC quarterly futures contract basis on OKEx

The BTC basis 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 remains lackluster

The BTC futures open interest had seen gradual growth leading up to September but has declined this month and is back near levels seen in June and July. 

Last Friday, the OI stood around $1.38 billion but it is around $1.36 billion today. There was no real directional movement or trend visible on the chart, but it would appear that shorts have been favored more than longs this week.

The general trend here is in line with the lack of enthusiasm in the market as BTC and altcoins find it hard to break out and kickstart another major run. However, as noted earlier, bulls aren't showing signs of complete defeat and are very much in the picture despite the latest price drops.

BTC futures open interest and volume on OKEx with highlights and historic trend

Open interest, or OI, is the value of 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 multiplied by the value of each underlying contract. 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.

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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.