Bitcoin (BTC) took off after the US Federal Reserve’s decision to raise interest rates on July 27th. Investors considered Federal Reserve Chairman Jeremy Powell’s statement to be more muted than at the previous FOMC committee meeting, suggesting that the worst moment for restrictive economic policies is behind us.
Other positive news for risk assets came from the US consumer spending price index (PCE), which rose 6.8% in June. This is the biggest increase since January 1982, reducing incentives for fixed income investments. The Federal Reserve focuses on the CPI index because of its broader measure of inflationary pressures, measuring changes in the prices of goods and services consumed by the general public.
Other equally positive news came from Amazon after the e-commerce giant announced that its quarterly financial results exceeded estimated revenue of $119.5 billion by 1.4%. Additionally, Apple released its second quarter results on the same day, matching analysts’ revenue estimates, posting earnings 3.4% above market consensus.
Top traders increased their bets on the upside
The data provided by the exchange shows the net long/short position of the traders. By analyzing each client’s position on spot, perpetual and futures contracts, it is possible to better understand whether professional traders are following higher or lower.
There are sometimes discrepancies in methodologies between different exchanges, so observers should monitor changes rather than absolutes.
Despite bitcoin’s 14% correction between July 20 and July 26, top traders at Binance, Huobi, and OKEx increased their leveraged long positions. To be more specific, Binance was the only exchange that saw a slight decrease in the long/short ratio of the main traders from 1.22 to 1.20.
However, this impact was more than offset by traders at OKEx increasing their bullish bets from 0.66 to 1.17 in six days. The lack of panic selling after bitcoin failed to break above $24,000 on July 20 should be interpreted as a bullish trend.
If the buyers were over leveraged or wary of the potential upside, the price movement would do much more damage to the long/short ratio.
Also read: 3 Bitcoin Exchange Behavior Show BTC Refund to $24,000 It’s a Sham
Margin traders are unwilling to place bearish bets
Margin trading allows investors to borrow cryptocurrency to leverage their trading position, thereby increasing returns. For example, one can buy bitcoin by borrowing Tether (USDT), which increases one’s exposure to cryptocurrencies. In contrast, borrowing bitcoins can only be used to sell them short, betting on a drop in price.
Unlike futures, the balance between margin lending and short selling does not necessarily match. When the margin loan ratio is high, it indicates that the market is bullish – on the contrary, a low loan ratio signal that the market is bearish.
The chart above shows that investor sentiment bottomed out on July 21, when the ratio hit a four-month low of 8.6. From then on, OKX traders showed less demand to borrow bitcoin, which was used exclusively to bet on the downward price trend. The ratio currently stands at 13.8, which favors the downside in absolute terms, as it favors borrowing stable money.
Derivatives data shows no stress from professional traders, even when bitcoin traded below $21,000 on July 26. Unlike retail traders, these experienced whales know when to stick with their convictions and that attitude was clearly reflected in the healthy derivatives data. The data suggests that traders expecting a sharp correction in the market will be disappointed if bitcoin fails to clear the $24,000 resistance.
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