BTC futures reflect overheated retail action as BTC eyes $60,000 again

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Bulls are driving BTC, but $60,000 presents a real challenge as market conditions overheat — Futures Friday

Over the past week, BTC’s price has surged rapidly after last Friday’s options expiry, rising from around 52,000 USDT to a high of 60,200 USDT, as per the OKX BTC spot price. A lot of good news flooded the market during this period, including Goldman Sachs offering Bitcoin exposure to its wealth management clients and Visa allowing the use of USDC to settle transactions through the Ethereum network.

In last week’s Futures Friday, we noted how retail investors had started to buy the bottom, which is reflected in the rising long/short ratio and USDT premium in the Asian market. This week, according to OKX futures data, retail sentiment is still strong, and not only has the long/short ratio moved upward rapidly in recent days but the quarterly contract premiums, as well as the perpetual swap funding rates, have reached levels seen in mid-March, when Bitcoin was setting all-time highs. However, the overheated retail sentiment also suggests that short-term risk levels are rising.

At the time of writing, the current quarterly contract BTCUSD0625 — expiring at the end of June — is trading at $59,500 levels with a premium of around $5.200, or 8.7%, over the index price. 

OKX BTC spot price, as of 4:00 pm UTC+8 on April 2. Source: OKX, TradingView

OKX trading data readings

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BTC long/short ratio

The long/short ratio reversed this past week and rose from a mid-week low of 0.87 to the current 1.32, indicating a high level of enthusiasm among retail investors. The market has also re-entered a bullish trend after the expiration of the first quarterly options.

Moreover, the premium of USDT on OKX shows a continued upward move, rising from last Friday’s 2% to the current 3.15%, indicating strong buying interest from the Asian market. 

Data collection time: 3/26 2:00 pm UTC to 4/2 2:00 pm UTC+8

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 has climbed along with the coin’s upswing, jumping from $3,000, or 5.7%, last Friday to its current $5,200, or 8.7%. The 8.7% premium is already close to the level it was at in mid-March when Bitcoin set its all-time high.

Following the rise in premiums are the funding rates for perpetual swaps, which began to rise midweek and have now reached over 0.15% per eight hours. These figures are certainly entering a more dangerous range. If the price does not break out to the upside in a short period of time, then traders attempting to chase the rally high with high leverage will have to close their positions, thus putting downward pressure on the price.

Data collection time: 3/26 2:00 pm UTC to 4/2 2:00 pm UTC+8

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

After the expiration of the quarterly contract last Friday, traders have rebuilt their positions and now the open interest is back at $2.9 billion levels, up $100 million from last Friday. This also indicates that the bulls built up their positions in the middle of the week and pushed the price upward.

Data collection time: 3/26 2:00 pm UTC to 4/2 2:00 pm UTC+8

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 making a counter-trend rise during the BTC retracement by the end of March. This week, the ratio has fallen back, from around 9.5 to the current 8.2, which may indicate that leveraged spot traders are starting to close out their positions after taking profits.

Data collection time: 3/26 2:00 pm UTC to 4/2 2:00 pm UTC+8

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

The current overheated bullish sentiment is already visible in several indicators from OKX trading data. If price cannot break the $60,000 psychological mark quickly, it is likely to form a bearish divergence on the RSI indicator for the four-hour chart, prompting a correction.

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