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Bitcoin Derivatives Futures Friday OKX Insights

BTC futures data show retail investors are betting on price recovery

2021.05.14 Robbie Liu

Bitcoin is struggling to recover the important 120-day moving average, but retail investors and whales have different conclusions about the market’s outcome. 

A tweet from Elon Musk on Thursday caused BTC to plunge nearly 20% to as low as 45,750 USDT, per the OKX spot markets. The foremost cryptocurrency closed Thursday below its 120-day moving average for the first time since the end of April 2020. During the current bull run, BTC had been supported by this moving average at several points between September and October of last year. During the 2017 bull run, BTC only closed below it on March 25 and 26, followed by a quick move to the upside.

Clearly, the market has now come to a critical point, and traders need to watch if BTC can recover its 120-day moving average — which sits at 50,540 USDT — this coming weekend.  

Bitcoin’s dominance has failed to rebound since this week’s plunge. It reached as low as 41% today, the lowest level since June 2018. This indicates that major altcoins have lost relatively less in value compared with BTC, and the market is still experiencing a so-called altcoin season. 

On the options market, according to data from CoinOptionsTrack, the max pain price (i.e., the price at which the largest number of options contracts are in loss) for options that expired today, May 14, was $54,000. A huge number (1,625) of put options with a strike price at $52,000 have expired worthless. BTC may see a rebound again after the weekly options expiry. However, while the equity markets suffered a huge pullback during the week due to unexpectedly high Consumer Price Index numbers, which are used as an inflation indicator, they may continue to have some impact on BTC on the last trading day of the week. 

Looking at OKX futures data, the current quarterly contract (BTCUSD0625), expiring at the end of June, is trading at $51,300 levels with a premium of around $800, or 1.6%, over the index price. Moreover, the long/short ratio is still running near the recent high level of 2.0 and is accompanied by declining open interest.

OKX BTC spot price, as of 9:00 am UTC on May 14. Source: OKX, TradingView

OKX trading data readings

Visit OKX’s trading data page to explore more indicators. 

BTC long/short ratio

The long/short ratio did not fluctuate much before Thursday’s plunge, oscillating in a range of 1.4 to 1.7. But on Thursday, this ratio started to surge and almost hit 2.0 on Friday. This is the highest level we have seen since the end of April. Considering that prices are still hovering around 50,000 USDT, such a high long/short ratio may indicate that retail investors are overly optimistic about the market’s prospects.

It is not yet clear whether retail investors are betting on a short-term price rebound or if they think 50,000 USDT is a good entry point for long-term holding. 

Data collection time: 5/7 9:00 am UTC to 5/14 9:00 am UTC

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

The premium for the quarterly contract BTCUSD0625 was running consistently above 3% last weekend. But the premium began to move lower going into this week and reached less than 1% during Thursday’s sell-off. It is now back to 1.6% levels, or about $800, indicating that the market has somewhat lowered its expectations for the end of June price. 

Data collection time: 5/7 9:00 am UTC to 5/14 9:00 am UTC

This 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 and trading volume

Open interest climbed to a high of $2.4 billion at the end of last week but then lost its momentum. Thursday’s decline resulted in the liquidation of positions worth $480 million on OKX alone, which caused OI to slide further to less than $2.2 billion, the lowest level since the beginning of February. 

In addition, as OI did not pick up along with the long/short ratio after the sell-off, it suggests that whales do not seem to be betting on significant price recovery. Market interest in trading BTC remains low overall. 

Data collection time: 5/7 9:00 am UTC to 5/14 9:00 am UTC

Open interest is 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. 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.

BTC margin lending ratio

The margin lending ratio was largely hovering in a narrow range of 7.75 to 9.05 until Thursday. During the sell-off, the ratio made a big drop, plunging from 10.02 to 4.50 and then stabilizing around 8.0. This indicates that spot-leveraged traders may have also suffered a massive liquidation during the crash, in which borrowed positions in BTC were swept away.  

Data collection time: 5/7 9:00 am UTC to 5/14 9:00 am UTC

The margin lending ratio is spot market trading data showing the ratio between users borrowing USDT versus borrowing BTC in USDT value over a given period of time. 

This ratio also helps traders to look into market sentiment. Generally, traders borrowing USDT aim to buy BTC, and those borrowing BTC aim to short it. 

When the margin lending ratio is high, it indicates that the market is bullish. When it is low, it indicates that the market is bearish. Extreme values of this ratio have historically indicated trend reversals.

Trader insights

Robbie, OKX Market Analyst

BTC is currently struggling to recover its historically extremely important 120-day moving average. If the bull market continues, this could be a good entry point. However, judging from OKX trading data, the excessively high long/short ratio and the ongoing decline in open interest may indicate that the market is not as promising as retail investors may think. 

OKX Insights presents market analyses, in-depth features and curated news from crypto professionals.

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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.