October has just begun and the price movement in the cryptocurrency markets was exciting and alarming. Bitcoin (BTC) fell sharply by $ 10.9K last week and hit a low of $ 10.2K.
Stationary saw price movement has been the norm for the past 3 weeks and is pretty dire for bulls and bears. Whatever the reason for these moves, it is clear that the recent flood of negative cryptocurrency news has scared investors.
Over the past two weeks, KuCoin has been hacked for $ 150 million, BitMEX has been charged with multiple crimes, John McAfee has been arrested, and the UK’s top economic regulator has decided to ban cryptocurrency exchanges. This was enough to break the 30-day correlation with the S&P 500, and also signal that market sentiment could change.
The chart above shows how strong the correlation between the S&P 500 and Bitcoin is over the course of the year.
There were no weeks when prices in the two markets were different. Few exceptions found – first week of September and last six days.
To understand if this difference is due to increased interest in cryptocurrency or a lack of it, traders should check volume.
On large exchanges, volumes decreased, which can hardly be called a positive moment. This is clear evidence of investor interest, at least at the current level.
You should not automatically infer that traders are bearish based solely on target sizes. For this to occur, both buyers and sellers must be unwilling to trade in today’s price range.
Funding levels show that short-term companies feel safe
Excessive influence on both sides will affect the degree of funding. This is because each perpetual futures contract has a built-in margin fee.
Funding rates are usually changed every 8 hours to avoid misadjusting foreign exchange risk, and although the open interest of buyers and sellers is always the same, leverage can vary.
If buyers use more leverage than sellers, the financing rate will be positive and buyers will pay. The opposite happens when sellers of futures contracts demand higher margins.
After a short increase in early September, the funding ratio was either unchanged or slightly negative. The negative rate of 0.05% for 8 hours equals 1% per week and, although high enough, it is not enough to force traders to close their positions.
This does not necessarily mean bearish investors, but it does indicate that it is the sellers of the futures contracts who are using the higher leverage.
The best traders are short neutral
Stock exchange data sheds light on traders’ positions in the long and short term. By immediately analyzing the position of each client, as well as on fixed and future contracts, you can get a clearer idea of whether professional traders are leaning up or down.
With that said, there are inconsistencies in the methodology of the various exchanges from time to time, so viewers should look for changes rather than absolute numbers.
As you can see from the above chart, OKEx traders have been taking positions on net cards since September 14th. This happened when BTC was trying to overcome the $ 10,500 resistance. Assuming that these traders have taken short positions close to this level, the maximum loss they have had so far was 7%.
To assess whether this is an isolated movement or related to an exchange, we have to compare data from other exchanges.
Although the largest traders on Binance did not open net card positions, they achieved a net buy of 10% on September 13 and have maintained that level ever since.
As mentioned earlier, stock exchanges have different methods of indexing long and short contracts, and clients may have more (or less) BTC deposits for different reasons.
Both weak volumes and a slightly negative funding ratio indicate a lack of interest in buyers at current levels. Meanwhile, top trader data and net position data show the lowest long / short ratio in 10 weeks.