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Bitcoin Derivatives OKX Insights Trading Futures Friday

Bitcoin futures data shows retail expects bullish continuation

2021.11.12 Hunain Naseer
As BTC retraced after setting a new all-time high this week, futures data indicates retail traders expect bullish continuation.

In last week’s edition of Futures Friday, we highlighted how retail traders appeared to be expecting more upside from BTC as it traded between 60,000 and 62,000 USDT levels. 

Since then, the market leader has gone on to post a new all-time high above 69,000 USDT, followed by a sharp retracement. The market leader is currently trading around 65,000 USDT levels, per the OKX BTC/USDT price.

From a technical perspective, BTC is still following a bullish trajectory and has posted two new all-time highs in quick succession. As long as it maintains this trend and doesn’t fall below 58,000 USDT, we can expect continuation.

Meanwhile, the quarterly contract — BTCUSD1231, expiring in December this year — is trading around $66,350 with a premium of $1,500 — $200 less than last week’s $1,700. The BTCUSD0325 contract, expiring in March next year, is trading at $68,387, and its premium, at $3,500, is also around $200 less than last week’s.

This slight decline in premiums is typical of a strong move up, as the market starts factoring in the possibility of sharp retracements that often follow.

OKX BTC spot price on Nov. 12, with blue arrows marking Fridays. Source: OKX, TradingView

OKX trading data readings

Below we take a look at several indicators to better understand market sentiment. You can visit OKX’s trading data page to explore more indicators.

BTC long/short ratio hints at trend continuation for now

Last week, we highlighted how the long/short ratio has been trending above 1.0 for a while, indicating that retail traders remain optimistic about more upside for BTC. This week, we saw the trend continue. There was a sharp dip as BTC reached for new highs on Nov. 8, but even then, the value didn’t fall below 1.0. Subsequently, as the BTC price dropped yesterday, we saw an uptick in the figure, indicating new longs being opened at current levels.

As long as this ratio remains in a healthy range, between 1.0 and 1.5, we can expect BTC to stay bullish. However, exceedingly high figures, such as the ones seen in May (around 2.0) can also hint at an impending reversal.

BTC futures long/short ratio on OKX with markings highlighting values

The long/short ratio compares the total number of users opening long positions versus those opening short positions. The ratio is compiled from all futures and perpetual swaps, and the long/short side of a user is determined by their net position in BTC.

In the derivatives market, whenever a long position is opened, it is balanced by a short position. The total number of long positions must be equal to the total number of short positions. When the ratio is low, it indicates that more people are holding shorts.

BTC basis drops as BTC spikes higher

The basis or premium for BTC futures contracts reflects the market’s future projections. When we compare this week’s basis with last week’s, the values are slightly lower, which makes sense because Bitcoin has increased notably in the week and has set a new all-time high.

Moving forward, the market will be waiting to see how BTC acts now and whether it continues to consolidate in this range or slide lower. If BTC ranges here, we can expect the basis to remain stable or even increase slightly.

BTC quarterly futures contract basis on OKX

The BTC basis indicator shows the quarterly futures price, spot index price and also the basis difference. The basis of a particular time equals the quarterly futures price minus the spot index price.

The price of futures reflects the traders’ expectations of the price of Bitcoin. When the basis is positive, it indicates that the market is bullish. When the basis is negative, it indicates that the market is bearish.

The basis of quarterly futures can better indicate the long-term market trend. When the basis is high (either positive or negative), it means there’s more room for arbitrage.

Open interest continues pushing higher

In recent weeks, we’ve seen the BTC futures open interest on OKX reaching levels last seen in May this year. This week, the OI has actually surpassed those levels to set a new recent high above $2.77 billion. 

The current OI is more than double what it was at its lowest point in September this year, and signals increasing interest in the market in the shape of capital inflow.

While the current levels are healthy because they are backed by BTC’s price increase, any sharp rises, much like the long/short ratio, can also signal impending trend reversals, especially if the price does not follow the trend.

BTC futures open interest and volume on OKX with highlights and historic trend

Open interest, or OI, is the value of the total number of outstanding futures/swaps that have not been closed on a given day.

Trading volume is the total trading volume of futures and perpetual swaps over a specific period of time.

If there are 2,000 long contracts and 2,000 short contracts opened, the open interest will be 2,000 multiplied by the value of each underlying contract. If the trading volume surges and the open interest decreases in a short period of time, it may indicate that a lot of positions are closed, or were forced to liquidate. If both the trading volume and open interest increase, it indicates that a lot of positions have opened.

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Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involve significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.