Bitcoin (BTC), which gained support from the decision of the United States Federal Reserve to raise interest rates on July 27, rallied. Investors interpreted the statement of Federal Reserve Chairman Jeremy Powell as being more dovish than that of the previous FOMC meeting. This suggests that we are past the worst time for tight economic policies.
The U.S. personal consume expenditures price index (PCE) rose 6.8% in June, another positive sign for risk assets. This was the largest increase in fixed income investments since 1982. Because the PCE is a more comprehensive measure of inflation pressures than the other measures, it is used by the Federal Reserve to focus on these changes. It measures the price movements of goods and services that are consumed by the general population.
Amazon also reported positive news, reporting that its quarterly financial results beat estimates of $119.5 billion by 1.4%. Apple also released its 2Q results the same day. These numbers match analyst estimates and present earnings 3.4% higher than the market consensus.
Top traders increased bullish bets
The long-to-short net position of traders is highlighted by exchange-provided data. It is possible to determine whether professional traders are bullish or bearish by analyzing the position of every client on spot, perpetual, and futures contracts.
Sometimes there are discrepancies between the exchanges’ methodologies. Therefore, viewers should be able to monitor these changes and not just absolute numbers.
Top traders in Bitcoin short-to-long ratio at exchanges Source: Coinglass
Top traders on Binance and Huobi have increased their leverage longs despite Bitcoin’s 14% correction between July 20 and July 26. Binance, which saw a slight decrease in the long-to-short ratio of top traders, moved from 1.22 to 1.20.
OKEx traders increased their bullish bets by 0.66 to 1.17 within six days. Bullish should be taken as the absence of panic selling following Bitcoin’s failure to breach $24,000 support on July 20,
The price movement would have been much worse if buyers had used excessive leverage or were skeptical of the upside.
Related: Three Bitcoin trading patterns suggest that BTC’s rebound up to $24K may be a ‘fakeout.
Margin traders won’t place bearish bets
Margin trading allows investors borrow cryptocurrency to increase their trading position and thus increases the returns. One can borrow USDT (Tether) to buy Bitcoin, increasing their crypto exposure. Borrowing Bitcoin is only for shorting it, not to bet on its price falling.
Contrary to futures contracts, the ratio between margin shorts and longs is not necessarily equal. If the margin lending ratio is high it means that the market has bullish intentions. Conversely, a low ratio signals that the market has bearish intentions.
OKX USDT/BTC margin lending ratio. Source: OKEx
The chart below shows that investors’ mood plummeted on July 21st, when the ratio fell to 8.6. OKX traders showed less interest in borrowing Bitcoin from that point forward, as they mainly bet on the downtrend. The current ratio is 13.8, which in absolute terms leans bullish as it favors stablecoin lending by a large margin.
Data on derivatives shows that pro traders are not stressed, even though Bitcoin traded at $21,000 on July 26. These experienced whale traders know when to keep their convictions. This attitude is evident in the derivatives data. Data suggests that traders who anticipate a strong market correction should Bitcoin fail to break the $24,000 resistance level will be disappointed.
Risk is inherent in every investment or trading move. Before making any investment or trading move, you should do your research.