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Multiple indicators are signalling that professional traders are bullish on Bitcoin derivatives, suggesting that the $10,000 level could soon be tested.
There are few indicators capable of accurately detecting professional traders’ sentiment on Bitcoin (BTC). To ascertain whether or not market participants are positioned in a bullish or bearish manner, analysts usually rely on technical analysis and derivatives markets, although those usually mix retail flow.
More recently some exchanges created internal metrics exclusively measuring top traders positions. Looking at exchange-provided data highlighting traders’ long-to-short positioning, one can see that the indicator currently shows a 30-day high on the long/short positions at Binance.
Despite launching its futures platform only ten months ago, Binance is a top-5 contender with $430 million BTC open interest. A similar long/short ratio has been observed at Huobi futures.
Bitcoin futures and options markets corroborate such a favourable thesis by displaying a positive contango and a negative skew.
By combining three indicators (top traders positions, options skew, and futures contango) there is indisputable evidence that professional traders are bullish in the short-term.
Top traders long-to-short ratio
The Binance net long/short notional exposure of its top BTC/USDT futures top traders typically favors longs but the indicator now stands at its highest level.
Binance top traders long/short ratio. Source: Binance
As per the above chart, top accounts net exposure is currently 12% larger than shorts. This is a 6% increase from three days ago.
Huobi, also a top-5 BTC futures exchange, depicts a similar trend and currently shows $640 million open interest. What is notable is that Huobi’s indicator shows a more significant uptick as net shorts previously dominated ratio.
Huobi top traders long/short ratio. Source: Bybt.com
Huobi’s top traders long-to-short ratio had been below 1.00 until July 21, favoring net shorts. On that day the tide changed and currently the ratio stands at 1.14 which is the highest it’s been in 30 days.
Bitcoin futures contango has held steady
The premium for Bitcoin futures 1-month contracts, known as basis, has sustained a healthy positive level.
Bitcoin futures 1-month basis. Source: Skew
1-month BTC futures at OKEx and Kraken have been holding a 7% or more premium to current spot level, indicating contango. This indicator improved from a neutral 2% rate earlier this month.
Bitcoin options have also flipped bullish
Skew is a useful metric for gauging professional traders’ sentiment through options pricing. By comparing the implied volatility of put and call options, one can assert whether it is more costly to buy call (bullish) or put (bearish) options.
Bitcoin 1-month options 25% delta skew. Source: Skew
The chart above shows that the 1-month options 25% delta skew has just flipped to the negative side. A negative indicator means implied volatility for calls is more significant than puts, signaling a higher insurance cost for a favorable price move.
Although this is not necessarily a bullish indicator by itself (as other factors might influence options pricing), this trend change is unarguably an indicator of professional traders’ positive sentiment.
All three indicators are bullishly aligned
Currently the top traders net positions, options skew, and futures contango signify short-term bullish sentiment from professional traders.
Adding to this, as all the indicators turned bullish, Bitcoin price showed strength by breaking the $9,400 resistance on July 22.
Large and savvy traders seem to be betting that the $10,000 level could be tested earlier than expected. With altcoins rallying, there’s even more chance of continued uptrend.
The views and opinions expressed here are solely those of the author