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Bitcoin Derivatives OKEx Insights Futures Friday

Retail no longer buying BTC dips as macro factors drag market down

2021.03.05 Robbie Liu

OKEx futures trading data shows sluggish retail sentiment, with both the long/short ratio and quarterly contract premiums at recent lows.

Over the past week, Bitcoin saw selling exhaustion on Sunday and bottomed out from 43,000 USDT, as per the OKEx BTC spot price. After the U.S. stock market opened on Monday, however, Bitcoin was greatly affected by macro factors for the rest of the week. The most well-known cryptocurrency first bounced alongside the stock market in the first half of the week to reach a high of 52,630 USDT, and then retraced to 46,000 USDT levels amid extended losses in the tech-heavy Nasdaq Index. 

According to OKEx futures data, market sentiment was not optimistic during the week. The long/short ratio continued to fall, and traders' willingness to go long reached its lowest since the start of the year. The open interest, despite showing a quick rebound on March 3, soon dropped again, and the same was seen in the quarterly contract premiums.

At the time of writing, the quarterly contract BTCUSD0326 — expiring at the end of March — is trading at $47,200 levels with a premium around $400, or 0.8%, over the index price, hitting its lowest level over the week. 

OKEx BTC quarterly futures (BTCUSD0326), as of 9:00 am UTC on March 5. Source: OKEx, TradingView

OKEx trading data readings

Visit OKEx trading data page to explore more indicators. 

BTC long/short ratio

The long/short ratio has been moving downward over the past seven days, falling from 1.60 to the current 1.10, indicating the shift of many traders from long to short positions. A more pessimistic market sentiment has emerged as a result and the midweek price rebound only led to a brief recovery in the long/short ratio. 

Data collection time: 2/26 8:00 am UTC to 3/5 8:00 am UTC

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

The quarterly contract premium has remained in the 1% to 2% range over the past few days, but it fell below 1% today, reflecting the market's concerns. On the other hand, funding rates of the perpetual swaps remained in positive territory for most of the time, showing that retail traders have not surrendered completely. 

Data collection time: 2/26 8:00 am UTC to 3/5 8:00 am UTC

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 remained largely unchanged this week around $2.2 billion, and although there was a brief rally on Wednesday, long positions that were chasing the price rebound were quickly closed. The unimpressive OI indicates a lack of confidence in the market and traders can continue to monitor this indicator's recovery to identify long entries.

Data collection time: 2/26 8:00 am UTC to 3/5 8:00 am UTC

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 margin lending ratio surged from 12 to 18 last week. This week, however, this indicator moved all the way down to levels near 11, indicating that traders who had previously borrowed Bitcoin for more exposure have closed their long positions. Increased market uncertainty has also caused spot traders to reduce their leverage.

Data collection time: 2/26 8:00 am UTC to 3/5 8:00 am UTC

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.

Trader insights

Robbie, OKEx Investment Analyst

The Bitcoin price will probably continue to oscillate in a wide range of 43,000 to 52,000 USDT on the spot market due to the uncertainty of macro factors. However, Bitcoin is clearly stronger than the Nasdaq Index, which has fallen hard for three straight days and wiped out all of its gains since the start of the year. If Bitcoin pulls back to 43,000 USDT again, there is the possibility of a double-bottom pattern forming, which is positive in the short-term.


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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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