Typically, traders get skeptical after Bitcoin (BTC) “completes” a strong performance, such as the stellar move from $ 12,000 to $ 15,950 in recent weeks.
The 35% gain over the past 30 days led some traders to conclude that BTC is overstretched and needs a pull back. On the flip side, there are many traders who are confident that the current bull run can continue.
In general, the market is showing mixed signals as Bitcoin price fluctuates between $ 15,000 and $ 16,000. So many traders have to rely on their prejudices to confirm their investment decisions and this is a dangerous place.
Take, for example, the Crypto Fear and Greed Index, which currently shows 90, a mirror image of “90, Extreme Greed”. Many traders trade against the index when it is at polar extremes, meaning that “extreme greed” is a signal to take profits or sell, as it usually “means the market needs to be corrected” according to the website.
In addition, based on the runoff data both in the chain and in the crypto exchange, analyst Willy Woo has concluded that “blowing off the top is unlikely”. To resolve this data dispute, an investor could take a closer look at the long-to-short ratio between exchanges of top customers (or top traders).
Notice how the top traders at Binance reacted after Bitcoin’s movements. The graph shows that traders are reacting to price rather than trying to predict it. One should expect this move from more beginners buying the local tops and selling the dips.
It’s worth noting that each exchange treats the top traders ‘data differently, as there are several ways to measure clients’ net exposure using derivatives. Therefore, a comparison between different providers should be made based on percentage changes rather than absolute numbers.
Interestingly, OKEx data shows a different approach from top traders when Bitcoin surged above $ 15,800. Instead of blindly tracking price movements, these investors appear to wait up to two days before changing their strategy.
Although this strategy seems wiser at first glance and adds long positions as Bitcoin failed to hold the $ 15,600 level. Compared to the reactive behavior of Binance traders, there seems to be less despair. Even so, there is no sign of confidence in OKEx’s long-to-short positioning.
Sometimes the best trade is not to trade at all
Regardless of the success rate of these strategies, the long-to-short ratio on both exchanges shows that traders are not overly confident about the current price development of Bitcoin. While both appear to be in a slightly net long position right now, their stance will change as market sentiment moves.
With mixed signals, traders should avoid finding additional evidence to back up their views. Sometimes doing nothing is the best decision one can make, especially when even professional traders seem to change their position after small trend changes.
On-chain analysis, net flows from the exchanges, and indicators like the Fear and Greed Index are useful. However, they should not be excluded from analysis when conflicting messages are provided.
The views and opinions expressed here are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trading step is associated with risks. You should do your own research when making a decision.