Bitcoin Futures Traders Cautious As BTC Up 25% in a Week

Bitcoin Derivatives Futures Market Trading

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June 26, 2023 06:54 EDT

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Bitcoin (BTC) futures traders are turning somewhat bearish on the number one cryptocurrency, again favoring short positions over longs, data from crypto exchange OKEx shows. However, traders on the competing exchange Binance were less pessimistic on the near-term outlook for the coin.

According to a futures market report from OKEx published on Friday, the ratio of long positions to short positions on its bitcoin futures market has moved lower since the end of September, following an upward trend for most of August and September. 

The upward trending long/short ratio gave bitcoin “decent support that kept it afloat despite significant selling pressure,” OKEx wrote about the two prior months, adding that the uptrend has now broken down, meaning retail traders are increasingly favoring shorts over longs.

In futures trading, a short position is a bet that the price of the underlying asset will fall, while a long position is a bet that it will rise. A rising long/short ratio thus indicates increasing optimism on the price, while a falling ratio suggests traders are turning pessimistic. 

“At the time of writing, the long/short ratio is around 0.90, struggling to reclaim 1.0 since October started. This shows us that retail traders are betting against bitcoin’s rapid rise, potentially because the market leader has already gone up nearly 30% since the month started,” according to OKEx.

The findings from their report were also partially supported by data from Binance, which showed that the long/short ratio on their bitcoin futures market has moved lower since the end of September. Since October 1, however, Binance’s long/short ratio has moved slightly up again, and is currently sitting at 1.12.

Compared with OKEx’s ratio of 0.90, the data from Binance means that futures traders on Binance were markedly more bullish on bitcoin than OKEx’s traders.

Meanwhile, in support of the somewhat bearish angle of the commentary from OKEx was also price data from futures contracts of varying maturity on the exchange. 

In bullish market conditions, price premiums on futures contracts should normally be higher the further away a contract’s expiry date is, a situation known as contango.

According to the exchange, however, the price premiums on futures contracts expiring in December this year and March next year were only marginally higher today compared to Friday last week, which it said “doesn’t necessarily paint a very positive picture from a retail perspective.”

“Given how these premiums are relatively modest, we can infer that retail investors are approaching this potential second-leg of the bull run very cautiously,” OKEx’s Hunain Naseer wrote in the futures market report.

At the time the commentary was written, OKEx’s quarterly bitcoin futures contract, which expires in December this year, traded at USD 56,721. The price gives a premium over spot of about USD 1,330, which is “marginally higher” than the USD 950 premium from last week.

Similarly, the March 2021 contract traded at USD 58,355, with a premium of over USD 3,000, which OKEx said is “not significantly higher than last week’s USD 1,900.”

At 15:10 UTC on Friday, bitcoin was up by more than 1% over the past 24 hours, trading at USD 54,664. The price is up by 25% for the past 7 days, after smashing through the USD 55,000 mark on Wednesday. Earlier today, BTC also briefly touched USD 56,000.
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