After Bitcoin (BTC) “completes” a strong performance (like the shocking move from $ 12,000 to $ 15,950 in recent weeks), traders are usually skeptical.
The 35% increase in the past 30 days has led some traders to conclude that BTC is expanding too much and needs to fall back. On the other hand, there are many traders who are confident that the current upward trend will continue.
With the price of Bitcoin hovering between $ 15,000 and $ 16,000, the market is showing mixed messages overall, so many traders have to rely on their own prejudices to back up their investment decisions, which is a dangerous place.
Fear and Greed Index of the cryptocurrency (daily). Source: Digital Asset Data
For example, the “Encryption Fear and Greed Index” is currently displayed as 90, which reflects “90, Extreme Greed”. According to the website, many traders trade when the indicator shows extreme polarity points, which means that “extreme greed” is a signal to profit or sell because it usually means “that the market is about to correct”.
In addition, the data leak from the chain and cryptocurrency exchanges led analyst Willie Wu to conclude that “it is impossible to peak suddenly”. To resolve this data dispute, investors can carefully examine the transactions of large accounts (or wholesalers) from long to short term.
Binance BTC’s long-short ratio of the top traders. Source: Binance
Notice how Binance’s top traders reacted after the Bitcoin move. The histogram shows that the trader is reacting to its price instead of trying to predict it. One should expect more beginners to take this step to buy local tips and sell dips.
It should be noted that each exchange treats the data of large traders differently as there are several methods of using derivatives to measure clients’ net exposure. Therefore, any comparison between different service providers must be based on percentage changes rather than absolute numbers.
Interestingly, OKEx data shows that top traders took a different approach because Bitcoin rose above $ 15,800. It seems that these investors did not blindly follow the price trend but waited two days to change their strategy.
OKEx BTC’s top traders went long to short. Source: OKEx
While this strategy might seem wiser at first because Bitcoin failed to hold the $ 15,600 level, it extended the buying time. Compared to the reactive behavior of the Binance traders, the desperation seems to be less. However, there are still signs of confidence in OKEx’s long and short positions.
Sometimes the best offer is not to trade at all
Regardless of the success rate of these strategies, the long-short ratios of the two exchanges indicate that traders are not very confident about Bitcoin’s current price movement. While both appear to be net long, their positions change when market sentiment changes.
With mixed signals, traders should avoid finding more evidence to support their views. Sometimes doing nothing is the best decision, especially when professional traders seem to change position after a small change of direction.
It is helpful to analyze the chain, net exchange flow, and indicators such as the fear and greed index. However, if there are conflicting messages, they should not be excluded from analysis.
The views and opinions expressed in this article are only those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading activity involves risks. When making a decision, you need to do your own research.