Bitcoin (BTC) may not have sustained the $ 42,000 support, and for many, this is a slightly bearish sign. Interestingly, the downward move came shortly after KSA’s largest oil exporter, Saudi Aramco, denied claims to start mining Bitcoin.
Top traders on exchanges took the opportunity to add leverage long positions, a clear indicator of upward trends. Additionally, margin traders have increased their stablecoin borrowing, suggesting that whales and professional traders are expecting more upside from cryptocurrencies.
The weekly rally of 24%, Bitcoin from $ 34,000 to its highest level since the 20th. This indicator may have caused these savvy traders to increase their positions despite the lackluster price performance.
Professional traders use leverage to buy under $ 40,000
Notice how the OKEx top trades increased their Bitcoin longs from 0.68 on July 31st to 1.16 two days later. A ratio of 0.68 indicates that the long positions of these whales and professional traders were 32% smaller than their respective short bets, positions that benefited from a fall in prices.
On the flip side, the 1.16 long-to-short positions favored bullish positions by 16% and reflected confidence even as Bitcoin price fell below $ 40,000 on August 2nd.
However, there is no way of knowing whether these traders closed short positions or effectively added long positions. To better understand this movement, one needs to analyze the margin lending data.
Credit markets offer additional insights
Margin trading allows investors to borrow cryptocurrencies to take advantage of their trading position and thus increase returns. For example, you can buy cryptocurrencies by borrowing Tether (USDT) and thus increase exposure. Borrowing Bitcoin, on the other hand, can only be used to sell it and bet on the fall in price.
Unlike futures contracts, the balance between margin longs and shorts is not always the same.
The graph above shows that traders have borrowed more tether lately as the ratio rose from 2.00 to 2.50 on July 30th. The data is bullish in absolute terms, as the indicator favors borrowing from stablecoins by 2.5 times. It is also showing resilience in the face of the recent BTC price drop.
The data on derivatives leaves no doubt that OKEx’s top traders added long positions, even when Bitcoin was in the early hours of Jan.
Unlike retailers, these heavyweights can withstand some difficult waters, although neither the long-to-short indicator nor the margin loans show any signs of undue leverage.
At the moment, long positions appear confident in the face of a natural correction that has occurred after an 11-day rally.
The views and opinions expressed here are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trading movement involves risks. You should do your own research when making a decision.