Cryptocurrency market continues to bleed against BTC
BTC futures data shows short-term caution but mid-term optimism
Bullish sentiment has been resumed due to the El Salvador news — Futures Friday
Bitcoin was hit by a slate of bad news in the first half of the week, once again falling to 31,000 USDT. However, news that the president of El Salvador is contemplating a law to establish Bitcoin as legal tender pushed the price to recover its losses. Although BTC has continued its oscillating trend, the weekly candlestick has turned green this Friday.
On the options market, according to data from CoinOptionsTrack, the max pain price (i.e., the price at which the largest number of options contracts are in loss) for options that expire on June 11 is located at $36,000, down $3,000 from last Friday. The largest open interest (1,382 BTC) comes from put options with a strike price of $30,000, all of which are set to expire out-of-the-money (i.e., worthless).
Today, the previous quarterly contract BTCUSD0625 has been converted into a bi-weekly contract, while the previous bi-quarterly contract BTCUSD0924 has become the new quarterly contract, currently showing a premium of around $1,000, or $2.75% over the index price. The new bi-quarterly contract BTCUSD1231 has also been created, currently showing a premium of $1,750, or 4.7% over the index price. These two premiums indicate that the market is still confident in the mid-term prices. Traders can continue to watch these two premiums for signs of market sentiment switch.
Looking at the OKEx futures data today, we can see that the long/short ratio is bouncing to a weekly high along with the price, although the margin lending ratio still shows some caution among spot traders. Open interest saw a quick pickup on Friday as traders are rebuilding their positions in the new quarterly contracts.
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BTC long/short ratio shows renewed bullishness
Although prices found the weekly bottom on Tuesday, the long/short ratio did not show a V-shaped reversal until Wednesday. The bullish engulfing pattern created on Wednesday on the daily chart led to a rapid reduction in the number of traders holding short positions. The long/short ratio, as a result, surged from about 1.0 to 1.5 in two days. However, the sustainability of the renewed bullishness among retail investors remains untested.
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 saw a recovery in the last three days
The premium for the quarterly contract has been reset on Friday. Looking at the premium of the new quarterly contract BTCUSD0924, it hit a weekly low of $400, or 1.25%, on Tuesday and then rebounded to the current $1,000, or 2.75%. However, the current optimism is still limited relative to the premiums during March and April, going as high as 10% or more.
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 picked up on Friday
Open interest has remained in an oscillating trend over the past week and has not significantly followed the ups and downs of price movement. On Friday, we noticed a rapid upward movement in OI, which could be a result of traders moving their positions from old contracts to new quarterly contracts. Open interest is currently at a one-week high of $1.4 billion.
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 shows caution among spot traders
The margin lending ratio saw a double-bottom pattern during the week, first falling from 7.5 to a low of 2.4, and then recovering to 5.8 levels. Although prices have rebounded to the week's high, the ratio still hovered in the middle. This indicates that spot leveraged traders remain relatively cautious.
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 Market Analyst
El Salvador making BTC legal tender has been the major news this week. Although the price of BTC is still not out of its previous oscillating range, Bitcoin's dominance has seen four consecutive days of gains. On the other hand, ETH/BTC has fallen back from 0.077 to the current 0.066.
Bitcoin miner flows data from CryptoQuant shows that miners’ production has seen a large decline in recent days, which may be related to China’s crackdown. And selling volume from miners has grown significantly. This trend could resist any upward movement from BTC in the coming weeks.
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