Bitcoin (BTC) saw a remarkable 15.7% price increase in the first six days of December. This increase was heavily influenced by the expectation of an imminent approval of a spot exchange traded fund (ETF) in the United States. Leading Bloomberg ETF analysts have expressed a 90% chance of approval from the US Securities and Exchange Commission (SEC), which is expected before January 10.
However, Bitcoin's recent price rise may not be as simple as it seems. Analysts have not taken into account the multiple rejections at $37,500 and $38,500 in the second half of November. These rejections have led professional traders, including market makers, to question the strength of the market, particularly from a derivatives metrics perspective.
Bitcoin’s inherent volatility explains the lower appetite of professional traders
Bitcoin's 7.6% rise to $37,965 on November 15 resulted in disappointment as the move completely reversed the following day. Similarly, Bitcoin price fell 5.3% between November 20 and 21 after resistance at $37,500 proved more formidable than expected.
While corrections are natural even in bullish markets, they explain why whales and market makers avoid leveraged long positions in these volatile conditions. Surprisingly, despite positive daily candles during this period, buyers using long leverage were forcefully liquidated, with losses over the past five days reaching a staggering $390 million.
Although the Bitcoin futures premium on the Chicago Mercantile Exchange (CME) reached its highest level in two years, indicating excessive demand for long positions, this trend does not necessarily apply to all exchanges and customer profiles. In some cases, top traders have cut their long-to-short leverage ratios to their lowest levels in 30 days. This suggests a profit-taking move and reduced demand for bullish bets above $40,000.
By consolidating positions in perpetual and quarterly futures contracts, a clearer insight can be gained into whether professional traders are inclined to be bullish or bearish.
BTC long-short ratio of exchanges' top traders. Source: Coinglass
As of December 1st, OKX's top traders favored long positions with a strong ratio of 3.8. However, these long positions were closed when the price rose above $40,000. Currently, the ratio significantly favors short positions at 38%, marking the lowest level in over 30 days. This shift suggests that some key players have backed away from the current rally.
However, not the entire market shares this opinion. Binance’s top traders have shown an opposite move. On December 1st, their ratio favored long positions by 16%, which has since increased to a 29% position, trending towards the bullish side. Nevertheless, the lack of leveraged long positions among top traders is a positive sign and confirms that the rally is primarily driven by spot market accumulation.
Related: Canadian crypto exchanges reach $1 billion in assets under management
Options data confirms that some whales are not buying into the rally
To determine whether traders have been caught off guard and are currently keeping short positions underwater, analysts should examine the balance between call (buy) and put (sell) options. Growing demand for put options typically indicates that traders are focusing on neutral to bearish pricing strategies.
Put to call volumes for BTC options at OKX. Source: Laevitas.ch
Data from Bitcoin options on OKX shows increasing demand for puts compared to calls. This suggests that these whales and market makers may not have anticipated the price increase. Nevertheless, traders did not bet on a price decline as the indicator favored call options in terms of volume. Excessive demand for put (sell) options would have pushed the ratio above 1.0.
Bitcoin's rise towards $44,000 appears to be healthy as excessive leverage has not been used. However, some major players were caught off guard by reducing their leveraged long positions while showing increased demand for put options.
As Bitcoin price remains above $42,000 in anticipation of a possible spot ETF approval in early January, the incentives for bulls to put pressure on whales that have chosen not to participate in the recent rally become stronger.
This article is for general information purposes and is not intended to constitute, and should not be construed as, legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect the views and opinions of Cointelegraph.
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