Margin trading allows investors to borrow stablecoins or cryptocurrencies to take advantage of their positions and increase expected returns. For example, borrow Tether (USDT) Will allow people to buy Bitcoin, thereby increasing their Bitcoin (Bitcoin) Long positions.
Investors can also borrow BTC for short trading margin trading, thus betting on a price drop. This is why some analysts monitor the total loan amount of Bitcoin and Tether to gain insight into whether investors tend to be bullish or bearish.
Are analysts bearish based on Bitfinex’s margin data alone?
This week, some well-known analysts pointed out that Bitfinex’s Bitcoin short position surged, reaching a peak of 6,621 BTC on June 7.As reported by Cointelegraph, independent researcher Fomocap found Correlation between margin short positions and the price collapse on May 19.
However, when analyzing the broader situation, including margin long positions, perpetual contract financing rates and protective put options, there is no evidence that well-known participants are prepared to take unexpected negative actions.
A single Bitcoin margin short position should not be considered a leading indicator if the price surges before negative fluctuations in price. In addition, the Bitcoin margin bulls need to be considered, which is an opposite and usually greater force.
As shown in the figure above, even on May 17, the number of BTC/USD long margin contracts was 3.6 times the number of shorts, reaching 39,000 BTC. In fact, the last time the indicator fell below 2.0 in favor of bulls was on November 26, 2020. The result is not good for bears, as Bitcoin has risen by 64% over the next 30 days.
Whenever traders borrow Tether and stablecoins, they are likely to be long cryptocurrencies. On the other hand, BTC lending is mainly used for short positions.
In theory, whenever the USDT/BTC loan ratio rises, the market will tilt in a bullish manner. The OKEx ratio bottomed out at 3.5, which was good for the bulls on May 20, but it quickly returned to the level of 5.5. Therefore, there is no evidence of a major change in the margin market that favors short positions.
Perpetual contract funding interest rates remain flat
Perpetual futures prices are very close to regular spot exchanges, which makes life easier for retail traders because they no longer need to calculate futures premiums.
This magic can only be achieved through the rate of funds charged from the longs (buyers) when more leverage is required. However, when the situation reverses and the shorts (sellers) are over-leveraged, the funding interest rate becomes negative and they become the people who pay the fees.
As shown above, since May 19, financing interest rates have remained basically flat. If short-selling demand soars, the indicator will reflect this trend.
Option call option ratio is still bullish
Call (buy) options provide upward price protection for their buyers, while put (sell) options do the opposite. This means that traders who target a neutral to put strategy will often rely on put options. On the other hand, call options are more commonly used in call positions.
Note how the number of neutral call options exceeds protective put options by nearly 90%. If professional traders and whales have been predicting market crashes, this ratio will be positively affected.
Investors should not make trading decisions based on a single indicator, because other markets and exchanges may not be able to confirm this. Currently, there is absolutely no indication that heavyweight players are betting on short Bitcoin positions.
The views and opinions expressed here only represent Author It does not necessarily reflect the views of Cointelegraph. Every investment and transaction involves risks. When making a decision, you should conduct your own research.