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Bitcoin Derivatives OKX Insights Trading Futures Friday

Bitcoin futures data shows retail is now favoring BTC longs

2021.10.29 Hunain Naseer

After BTC’s new ATH, retail traders appear to be expecting further price growth.

In last week’s edition of Futures Friday, we discussed how retail traders appeared to be warming up to BTC as the market leader set a new all-time high at 66,999 USDT. Since then, BTC has remained volatile, ranging between 63,000 USDT and 56,000 USDT levels. 

At the time of writing, BTC is trading just above 60,700 USDT, per the OKEx BTC/USDT price. From a technical perspective, as long as Bitcoin remains above 58,000 USDT for this month’s closing, we should see further expansion of this rally in the coming months. However, any sustained break below that level could put a stop to the bullish advance.

Meanwhile, the quarterly contract — BTCUSD1231, expiring in December this year — is trading around $62,730 with a premium of $1,800, roughly the same as last week’s. The BTCUSD0325 contract, expiring in March next year, is trading at $64,700 and is also in line with last week’s premium at $3,700.

There are minor drops in these premiums over a weekly basis, but they have held reasonably well given how BTC has had a few sharp price slides since.

OKEx BTC spot price on Oct. 29, with blue arrows marking Fridays. Source: OKEx, TradingView

OKEx trading data readings

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

BTC long/short ratio shows retail optimism

Last week, we saw how the long/short ratio had finally started to test the 1.0 figure, signaling the possible return of retail investors. Since then, the ratio has remained above 1.0 and peaked around 1.40 during BTC’s correction on Oct. 27.

The ratio is bullish now and shows that retail investors are starting to believe in the possibility of higher prices in the near future. As long as this trend remains above 1.0, we can expect BTC to remain on an uptrend.

BTC futures long/short ratio on OKEx 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 retreats but remains bullish

The basis or premium for BTC futures contracts reflects the market’s future projections. Comparing this week’s basis to last week’s shows a minor retreat, but that is in line with BTC’s price sliding since the ATH. 

What is promising, however, is that the basis did not correct sharply and is still well within the bullish range we saw expanding in October.

BTC quarterly futures contract basis on OKEx

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 remains healthy

Last week, we noted how BTC futures open interest on OKEx was peaking around levels last seen in May this year. The OI surge coupled with BTC’s price rise was a healthy indicator, reflecting the inflow of capital backing the price expansion.

This means we should be looking out for sharp declines in OI. While the OI figure did drop following BTC’s retreat from its new ATH, it is still at healthy levels and is showing signs of trend continuation. As long as OI levels don’t drop too much, we can expect BTC to consolidate and continue its journey upward.

BTC futures open interest and volume on OKEx 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.



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