In the past 48 hours, Bitcoin’s (BTC) price has dropped by $13,360 and over $2.6 billion value of futures contracts are liquidated. When adding altcoins, the total sum of liquidations equaled $5.9 billion.
This means that half of those terminated leverage positions have been reopened.
As stated by the top traders’ long-to-short statistics and various financing rate indicators, retail traders took the greatest hit.
Top dealers bought the dip
The top dealers’ long-to-short indicator is calculated by using clients’ merged positions, including place, margin, endless and futures contracts. Unlike the futures or options signals signs, this metric gathers a wider view of professional dealers’ effective net position.
Regardless of the discrepancies involving crypto market methodologies, analyzing changes over time provides invaluable insights.
Top traders in Huobi held a 0.81 long-to-short ratio on Feb. 20, favoring shorts by 19%. By adding net long positions over the subsequent 48 hours, the indicator peaked at 0.95, indicating that buy-side action prevailed.
OKEx top traders were aggressive net buyers within the previous 3 days. Beginning from a 0.86 indicator favoring shorts by 14 percent, they have managed to revert it to some 69% net buyer position.
Lastly, Binance top dealers started at 1.36, favoring net longs, but were either liquidated or opened up net shorts until reaching the present 1.23 level. In any event, those traders haven’t been adding positions over the past 3 days.
All in all, the average top dealers’ long-to-short position moved from 1.01 (apartment ) on Jan. 20 to the current 1.37 favoring net longs. Therefore, it’s clear that arbitrage whales and desks improved their longs through the liquidations.
The low funding rate shows retail investors reduced their longs
If top traders are net buyers, then retail needs to be holding the opposite end, even though that happened through leveraged long liquidations.
To keep a balanced risk vulnerability, derivatives trades charge either perpetual futures longs (buyers) or shorts (sellers) a fee each eight hours. Called the financing rate, this index will turn positive when longs are those demanding more leverage.
On the other hand, periods of heavy and fear selling activity lead to negative funding rate turns. This time round, shorts would be the only paying up.
Since Feb. 6, the typical weekly financing rate has exceeded 2.3%. On the other hand, top traders typically opt for fixed-calendar futures in order to prevent the exorbitant financing fees during rallies.
After briefly flirting with a negative funding speed, it’s stabilized near 0.5% per week. The metric indicates that retail traders were liquidated, hence causing the indicator to return to neutral levels.
Although $50,000 appears to be a meaningful psychological level, Bitcoin’s 67% year-to-date gains will likely continue to attract investors. The small 3% performance in the S&P 500 and a 0.6% return on five-year U.S. Treasury Notes offer no match for its possible upside which may be obtained from cryptocurrencies.
