Bitcoin derivatives favor further BTC price rally towards $30K

Despite regulatory pressure and worsening macroeconomic conditions, Bitcoin (BTC) demonstrated bullishness holding near $28,000 for the past week. Furthermore, professional traders have maintained leveraged long positions in margin and futures markets, indicating strength.

On the regulatory front, on April 4, the Texas Senate Committee on Business and Commerce agreed to move forward and remove incentives for miners operating within the state’s regulatory environment. If passed, Senate Bill 1751 would cap compensation for load reductions on Texas’ power grid during emergencies.

The risk of recession increases against interest rate increases

The risk of a recession grew after US jobless claims for the week ending March 25 were revised to 246,000, up 48,000 from the first report.

Furthermore, International Monetary Fund (IMF) Managing Director Kristalina Georgieva stated on April 6 that the US and European economies should continue to struggle as higher interest rates weigh on demand.

On the banking crisis, Georgieva advised central banks to continue raising interest rates, adding: “concerns remain about vulnerabilities that may be hidden not only in banks but also non-banks – now is not the time for complacency.”

On the other hand, on April 6, St. Louis Federal Reserve President James Bullard downplayed concerns about the impact of financial stress on the economy. Bullard stated that the Fed’s response to banking sector weakness was “swift and appropriate” and that “monetary policy may continue to put downward pressure on inflation.”

Let’s look at the derivatives’ calculations to better understand how professional traders are positioned in the current market conditions.

BTC price derivatives reflect traders’ neutral sentiment

Margin markets provide insight into how professional traders are positioned because they allow investors to borrow cryptocurrency to leverage their positions.

For example, one can increase exposure by borrowing stablecoins and buying Bitcoin. On the other hand, borrowers of Bitcoin can only take short bets against BTC/USD.

The chart above shows that OKX traders’ margin lending ratio has remained close to 28x in favor of BTC longs over the past week. If these whales and market participants had perceived increased risk of a price correction, they would have borrowed Bitcoin for shorting, causing the indicator to fall below 20x.

Top traders’ net long-to-short ratios exclude externalities that may have solely affected margin markets. Analysts can better understand whether professional traders lean bullish or bearish by aggregating the positions in spot, perpetual and quarterly futures contracts.

Because there are some methodological differences between different exchanges, viewers should focus on changes rather than absolute numbers.

Between April 1 and April 7, the long-to-short ratio of top traders on Binance fell slightly from 1.17 to 1.09. Meanwhile, on the Huobi exchange, the top traders’ long-to-short ratio has been close to 1.0 since March 18. More precisely, the ratio fell from 1.00 on 1 April to 0.95 on 7 April, thus relatively balanced between longs and shorts.

Finally, the OKX whales presented a completely different pattern as the indicator fell from 1.25 on April 3rd to a low of 0.69 on April 5th, strongly favoring net shorts. These traders reversed the trend, aggressively buying Bitcoin using leverage over the past two days as the long-to-short ratio returned to 0.97.

Absence of Bitcoin shorts is a bullish indicator

Essentially, both the Bitcoin margin and futures markets are currently neutral, which should be interpreted positively given that the Bitcoin price rose 41.5% between March 10 and March 20 and was able to hold the $28,000 level.

Given the enormous regulatory uncertainty caused by the SEC’s Wells notice against Coinbase on March 22, the absence of shorts using margin and futures markets currently favors further price appreciation.

Unless the economic crisis unfolds faster than expected, inflation will remain a major concern for investors, and Bitcoin inflows should be enough to hold $28,000 as a resistance level.

The views, thoughts and opinions expressed herein are those of the authors alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.