Crypto market tense as BTC tries for new all-time high
Bitcoin futures reflect profit-taking post-$50,000 as market becomes cautiously optimistic
Futures Friday is a weekly review of quarterly Bitcoin futures on OKEx.
Bitcoin has not fallen below 40,000 USDT since news of Tesla's purchase of $1.5 billion worth of Bitcoin came out. Over the past week, the market leader made a 4,000 USDT, or 8%, correction on Monday morning UTC time before marching upward, setting an all-time high of 52,618 USDT on Wednesday evening. It then entered a consolidation phase, hovering around 52,000 USDT levels, as per the OKEx BTC Index price.
Bitcoin's dominance began to decline after Wednesday, meanwhile, exchange native tokens generally surged for three straight days. The market saw rotational plays among Bitcoin and exchange native tokens, represented by OKB and OKT.
This week's OKEx futures data shows that Monday's rapid decline caused longs to capitulate, and then prices were pulled up again. However, after making new highs on Wednesday, caution returned to the market, as reflected in the falling long/short ratio and quarterly futures premium.
At the time of writing, the quarterly contract BTCUSD0326 — expiring at the end of March — is trading at $52,000 levels with a premium of $2,700, or 5.2%, over the index price.
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BTC long/short ratio
Monday morning's plunge caused the long/short ratio to fall quickly from 1.6 to near 1.2, with many traders closing out long positions on the way down. The price was then pushed up to above 50,000 USDT on the spot.
Interestingly after the price stood firmly above the 50,000 USDT mark, the long/short ratio fell quickly, indicating that the market was not expecting a major surge. Over the past two days, the ratio has hovered between 1.3 and 1.5, with no clear trend.
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.
Premiums for quarterly futures were volatile this week. Monday's decline brought the premium down to 3.8% from a high of 5.8%. And the premium was back to 5.8% again when prices set new records on Wednesday. This reflects the market's behavior in terms of chasing the ups and downs.
Notably, Wednesday's new highs were accompanied by extremely high funding rates on perpetual swaps (0.26% for BTCUSD and 0.13% for BTCUSDT). Then, the market entered a consolidation phase with falling funding rates.
The current quarterly futures premium of 4.8% and funding rates of less than 0.1% are healthy, and Bitcoin will probably retest the previous high in the near future.
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 and trading volume
Open interest reached an all-time high of $2.8 billion on Wednesday but then gradually moved lower to the current levels around $2.6 billion. High funding rates forced some longs to close their positions at profit, but the OI may bounce back toward unprecedented levels along with the price in the near future.
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.
BTC margin lending ratio
The BTC margin lending ratio saw a rapid decline after Bitcoin surpassed the 50,000 USDT mark, dropping from 15.3 to 11.5. This indicates profit-taking in the spot leveraged market.
The margin lending ratio is spot market trading data showing the ratio between users borrowing USDT versus borrowing BTC in USDT value over a given period of time.
This ratio also helps traders to look into market sentiment. Generally, traders borrowing USDT aim to buy BTC, and those borrowing BTC aim to short it.
When the margin lending ratio is high, it indicates that the market is bullish. When it is low, it indicates that the market is bearish. Extreme values of this ratio have historically indicated trend reversals.
Robbie, OKEx Investment Analyst
The current price of around 52,000 USDT needs more new money to drive the price further up. Market participants are also aware of the possible risks and have taken some profits out of the market in recent days. That being said, news such as MicroStrategy issuing another $900 million convertible debt with an additional option for $150 million to purchase more Bitcoin is likely to continue driving the market. Shorting Bitcoin is still a risky proposition.
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