Short sellers liquidated to $150 million, but two metrics show that professional traders did not become bullish following the recent Bitcoin rally. Bitcoin’s price has risen above $43,000 as bulls aim for $45,000, while some analysts warn of the formation of a bearish flag, which could lead to a price correction. Market analyst and pseudonymous Twitter user “Rekt Captial” foreshadowed Bitcoin’s March 22 move by posting the following chart, noting that “If Bitcoin successfully retests the green dashed diagonal as new support,” it “will spring towards the green $43100 resistance ahead.”
Margin trading enables investors to borrow cryptocurrency to leverage their trading position and increase returns. One can, for example, buy cryptocurrencies by borrowing Tether and increasing their exposure.
On the other hand, Borrowers of Bitcoin can only bet on the cryptocurrency’s price falling. In contrast to futures contracts, the balance of margin longs and shorts is not always a match. The above chart shows that traders have recently borrowed more BTC, as the ratio has decreased from 15 on March 20 to 7.5. Even though the data remains bullish because the indicator favors stablecoin borrowing, it has dropped to its lowest level since March 9. Given that crypto traders are typically bullish, a margin lending ratio of less than three is considered unfavorable. As a result, the current confidence level remains positive, albeit slightly lower than two days ago.
At the moment, it isn’t easy to see where the market is going. Nonetheless, the 25% delta skew is a red flag when arbitrage desks and market makers overcharge for upside or downside protection. The delta skew of 25% compares similar call (buy) and put (sell) options. When fear is prevalent, the metric will turn positive because the premium for protective put options is higher than the premium for comparable risk call options.
The skew indicator will rise above 8% if traders anticipate a Bitcoin price crash. On the other hand, generalized excitement has a negative 8% skew. Despite the bearish indicator from Bitcoin options, these arbitrage desks and market makers will force to reverse bearish positions once the price breaks $45,000 and the current trend changes.
After a 13 percent BTC price rally in 10 days, the OKX margin lending rate showed pro traders reducing their bullish bets, so derivatives data provides a slightly bearish view. As a result, expecting a pump above $43,000 appears overly optimistic.
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