Despite regulatory pressure and deteriorating macroeconomic conditions, Bitcoin (BTC) has been bullish, holding near $28,000 for the past week. Additionally, professional traders have maintained leveraged long positions in margin and futures markets, indicating strength.
On the regulatory front, the Texas Senate Committee on Business and Commerce agreed on April 4 to move forward and remove incentives for miners operating in the state’s regulatory environment. If passed, Senate Bill 1751 would cap compensation for emergency load reductions on the Texas power grid.
The recession risk increases against interest rate hikes
The risk of a recession increased after US jobless claims for the week ended March 25 were revised to 246k, up 48k from the original report.
In addition, Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), said on April 6 that the US and European economies are likely to continue to struggle as higher interest rates weigh on demand.
Referring to the banking crisis, Georgieva advised central banks to keep raising interest rates, adding: “Concerns remain about vulnerabilities that may be hidden, not only in banks but also in non-banks – now is not the time for complacency.” .”
On the other hand, St. Louis Federal Reserve Chairman James Bullard on April 6 downplayed concerns about the impact of financial tensions on the economy. Bullard explained that the Fed’s response to banking sector weakness was “swift and appropriate” and that “monetary policy can continue to exert downward pressure on inflation.”
Let’s take a look at derivatives metrics to better understand how professional traders are positioned in the current market conditions.
BTC price derivatives reflect traders’ neutral sentiment
Margin markets provide insight into the position of professional traders as they allow investors to borrow cryptocurrency to leverage their positions.
For example, one can increase engagement by borrowing stablecoins and buying bitcoin. On the other hand, Bitcoin borrowers can only make short bets against BTC/USD.
OKX stablecoin/BTC margin lending ratio. Source: OKX
The chart above shows that OKX traders’ margin lending ratio has remained close to 28x over the past week in favor of BTC longs. If these whales and market makers perceived heightened risks of a price correction, they would have borrowed Bitcoin to short, causing the indicator to drop below 20x.
The top traders’ net long-to-short ratio excludes externalities that may have only impacted margin markets. Analysts can better understand whether professional traders are bullish or bearish by aggregating positions on spot, perpetual, and quarterly futures contracts.
Since there are some methodological differences between different exchanges, viewers should focus on changes rather than absolute numbers.
Long to short ratio of the exchange’s top traders. Source: coin jar
Between April 1 and April 7, the long-to-short ratio of top traders on Binance declined slightly from 1.17 to 1.09. On the Huobi exchange, the long-to-short ratio of top traders has been near 1.0 since March 18. More specifically, the ratio slipped from 1.00 on April 1st to 0.95 on April 7th, relatively even between longs and shorts.
Finally, the OKX whales showed a very different pattern as the indicator fell from 1.25 on April 3rd to a low of 0.69 on April 5th, heavily favoring net shorts. Reversing the trend, these traders aggressively bought Bitcoin with leverage over the past two days as the long-to-short ratio returned to 0.97.
The absence of Bitcoin shorts is a bullish indicator
Essentially, both bitcoin margin and futures markets are currently neutral, which is a positive to take as bitcoin price is up 41.5% between March 10th and March 20th reaching the 28k level could hold USD.
Given the huge regulatory uncertainty caused by the SEC’s Wells filing against Coinbase on March 22, the lack of shorts with margin and futures markets currently favors further price gains.
Unless the economic crisis unfolds faster than expected, inflation will continue to be a major concern for investors and Bitcoin inflows should be enough to sustain $28,000 as a resistance level.
The views, thoughts, and opinions expressed herein are solely those of the authors and do not necessarily reflect or represent the views and opinions of Cointelegraph.
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