Bitcoin Follows Suit as Global Assets Pull Back — Crypto Market Daily
Bitcoin Likely to Remain Bullish, as Market Indicators Reflect Room for Further Appreciation — Futures Friday
Futures Friday is a weekly review of quarterly Bitcoin futures on OKEx
Over the past seven days, in line with global assets, the price of Bitcoin (btc" target="_blank" rel="noreferrer noopener">BTC) has surged nearly 20%, with the OKEx Quarterly Future (BTCUSD0925) price breaking both the $9,800 and $11,000 barriers.
On the other hand, more than $700 million worth of Bitcoin options will expire today. However, given that Bitcoin options contracts are mainly cash-delivered and that BTC has been hovering around $9,000 for the past few months, a good chunk of these expiring options are likely to be “puts” that won’t be exercised.
Looking at OKEx trading data, several ratios — including the long-short and margin lending ratios — went up sharply before Wednesday, hinting at retail traders chasing Monday’s rally. Currently, the margin lending ratio is still high, but not unreasonable compared to March numbers.
Quarterly future premiums have also risen quickly this week, and the current 3% premium is in line with expectations under a bull market. However, this is also attracting more arbitrageurs.
All in all, the current market sentiment is healthy and retail investors are not in a FOMO mood. Bitcoin, which has recently moved more in sync with gold, still has a lot of upside potential.
OKEx trading data readings
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BTC long/short ratio
Prior to July 27, which was when BTC quarterly future price rose from $9,700 to $10,700, the long/short ratio was at average levels, running within a range of 0.82 to 1.12. There was even a downward trend in the long/short ratio when the price rose, indicating that retail investors didn’t have much confidence in the initial rally. The rise in the long/short ratio began to accelerate after price broke above $10,800 — and in the following half-day, the ratio quickly rose from 0.96 to a weekly peak of 1.41.
The long/short ratio is currently running near 1.2, which is tepid. However, it also shows that, while prices have risen a lot, the overall bullish sentiment among retail investors is still not overheated.
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.
OKEx BTC Quarterly Future’s premium has risen rapidly from $150 (roughly 1.6%) on last Friday to the current $360 (or 3.23%). This indicates a very positive market expectation for the end of September. However, higher premiums will attract arbitrageur opening shorts in quarterly futures, which may put pressure on further premium increases.
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 has risen gradually over the past seven days to over $1.2 billion, up from $988 million on Friday. However, the rate of increase slowed after Wednesday.
With overall market leverage not as high as it was in March, OI is expected to continue rising with price and market enthusiasm.
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
After rising to 7.4 from 3.5 last week, the margin lending ratio continued its rapid climb to a high of 15.82 this week. But similar to the increase in OI, the ratio moved upward at a slower pace after Wednesday. Right now, it is consolidating between 13.0 and 16.0.
The margin lending ratio has doubled in the last seven days, suggesting that retail investors are more bullish in the spot leveraged market. Compared with the mid-February high of 33.0, the current ratio is considerably high, but not extremely high.
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
Given Bitcoin’s large gains over the past seven days, it could enter a consolidation phase between $11,000 and $11,700 in the near term. The macro trend is still clearly bullish, and short-term adjustments are unlikely to reverse the rising pattern. However, chances of a sustained short-term rally like the beginning of this week are slim.
The market’s movement is driven by investor sentiment. In terms of the trading data, it is clear that market participants have been more positive over the past week and have not piled up any selling pressure.
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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