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According to data, professional traders are heavily investing the recent drop in the price of Bitcoin, whereas institutional investors are preoccupied with trading altcoins.
Bitcoin (BTC) has been fighting to hold the $55,000 support level for the past 16 days, or after the record-high $5 billion long contracts liquidation on April 17. The rejection that occurred after the all-time high of $64,900 had a disastrous effect on retail traders’ sentiment, as measured by the dramatic decrease in the perpetual futures funding rate.
Despite Bitcoin’s recent underperformance and a 6.5 percent decline on May 4, professional traders have been buying the dip over the past 24 hours. The activities of whales and arbitrage desks are mirrored in the OKEx futures long-to-short ratio and Bitfinex’s margin lending markets. Although this buying is taking place, retail traders are still silent, as expressed in the neutral perpetual funding pace.
The perpetual futures (inverse swaps) 8-hour funding cost has been below 0.05 percent for some weeks, as seen above. Prices for end-of-month contracts vary greatly from normal spot exchanges, reflecting the imbalance between longs and shorts leverage.
This disparity is why retail traders favour perpetual futures, even with the varying carry cost generated by increases in funding rates.
The new eight-hour fee equates to a 1% weekly average, indicating a marginal imbalance on longs. However, this amount is far lower than the 0.10 percent and higher peaks seen in early April. This data shows that institutional traders are unable to add Bitcoin long positions, considering the 9 percent drop in two days.
The top traders’ long-to-short tracker, on the other hand, hit its highest level in 30 days, indicating purchasing interest from whales and arbitrage desks. This metric is determined by examining the client’s total position on spot, permanent, and futures contracts. As a result, it is easier to see whether experienced traders are bullish or bearish.
As shown above, the latest OKEx futures long-to-short ratio favours longs by 94%. This buying operation began in the early hours of May 4th, when Bitcoin fell below $55,000. More specifically, it indicates much more trust than on April 14, when BTC reached an all-time high of $64,900.
However, in order to determine if this trend is universal, one must also examine margin markets. For eg, the leading exchange (Bitfinex) has leveraged Bitcoin positions worth over $1.8 billion.
Bitfinex has seen spectacular growth in the BTC margin markets, with longs outnumbering shorts by more than 50 times. These amounts are unparalleled in the history of the exchange and validate the evidence from OKEx’s futures markets.
After the Bitcoin drop on May 4, experienced traders remain extremely bullish. In terms of retail traders’ lack of interest, it seems that their attention is currently focused on altcoins.
In the last 30 days, 18 of the top 50 altcoins have gained 45 percent or more.
The concern is whether the altcoin rally will survive if BTC struggles to set a new all-time high in the coming weeks.