Bitcoin (BTC) investors appear concerned about growing speculation that China’s second largest real estate developer, Evergrande Group, will default on $ 300 billion in debt. These concerns are reflected in global equity markets, which fell between 1.5% and 3% this morning when the market opened.
Despite the price volatility, BTC outflows (net withdrawals) from exchanges have been trending for months, especially at Coinbase Pro.
Traders also know that each exchange has a different user profile. For example, liquidations on Bybit tend to be tougher compared to FTX, which is known to have more conservative customers.
Take, for example, today’s drop below $ 43,000, which resulted in the liquidation of a Bybit-led long contract for $ 1 billion despite having $ 2.34 billion in open futures. This is less than Binance’s $ 3.66 billion liquidation and FTX’s $ 2.51 billion.
The above data shows that Bybit traders take higher risk and often use higher leverage. Meanwhile, Binance and FTX derivatives investors were less affected by the negative daily movement of 11%.
Professional traders remain neutral on the uptrend
To understand whether professional traders are following an upward or downward trend, one should analyze futures premiums (or prime rates). This indicator measures the difference between a longer-term futures contract and the current spot market level.
In healthy markets, an annual premium of 5 to 15% is expected, a situation known as contango. This difference in price is due to the fact that the seller needs more money to withhold payments longer.
A red alert will appear when this indicator fades or goes negative in what is known as a “withdrawal”.
As described above, the current annual premium of 7% is neutral, but corresponds to the average of the previous month. When professional traders get nervous or bearish, this indicator drops below 5%.
The long-short ratio of the top traders shows buying activity
Investors should monitor the long-to-short ratio of top traders on the top crypto exchanges in order to accurately measure the positions of professional traders. This metric provides a complete view of traders’ effective net positions by gathering data from a variety of futures and margin markets.
It’s worth noting that each exchange collects data on top traders differently, as there are several ways to measure clients’ net exposure. Therefore, any comparison between multiple providers should be based on percentage change rather than absolute number.
The long / short ratio of OKEx’s top traders has risen from 8% in favor of longs to 54% today, a ten-day high. Binance derivatives traders, on the other hand, are maintaining a consistent 10% margin in favor of long purchases despite the Bitcoin price correction.
Both data confirm that retailers are likely to be more affected by heavily leveraged bullish positions. In the meantime, professional traders either keep their positions or use the reduced price to add long positions.
The views and opinions expressed here are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trading movement carries risks. You should do your own research when making a decision.
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