On Monday, Bitcoin (BTC) fell to $40,500, hitting a crucial level that erased the gains of the previous three weeks, when the price hit a high of $48,200 on March 28.
According to analysts, the US Federal Reserve’s shrinking balance sheet is adding pressure to stocks and risk assets, and Bitcoin is losing appeal.
Decentrader co-founder filbfilb agreed with these powerful headwinds by arguing that the Fed’s action could influence the price trend of BTC “for months”.
Bitcoin reacted unfavorably to the dollar’s resurgence, with the US Dollar Money Index (DXY) once again breaking above 100 points for the first time since May 2020. While some view the DXY event as a temporary show of strength, its impact on the cryptocurrency markets was clear.
Data shows margin traders are bullish
Margin trading allows investors to borrow a cryptocurrency to leverage their trading position in hopes of increasing profits. Traders can borrow Tether (USDT) to open a leveraged long position, while Bitcoin borrowers can only short the cryptocurrency because they bet on its price falling. Unlike futures contracts, the balance between long and short margin positions does not always coincide.
The chart above shows that traders have been asking for more USDT recently, a fact that is shown by the ratio rising from 9.6 on April 8 to the current 15.9, which is the highest level in two months.
Even though the lending margin reached 5 on March 28, the indicator favored stablecoin lending.
Cryptocurrency traders tend to be bullish, so a Margin Lending Ratio of less than 3 is considered unfavorable. So the current level is still positive, just less confident than last week.
The ratio of long and short positions is slightly bearish
The net ratio of professional traders’ long to short positions excludes externalities that might have affected longer-dated futures instruments. By analyzing these positions on cash, perpetual and futures contracts, you can better understand whether professional traders are leaning bullish or bearish.
From time to time there are methodological discrepancies between the various exchanges, so viewers should keep an eye on changes rather than absolute numbers.
Excluding a brief spike in the Bitcoin long-to-short ratio on OKX on April 6, professional traders have slightly reduced their (bullish) long positions since March 31. This move is directly opposite to the margin trading markets featured above, which showed a significant improvement in sentiment in the first week of April.
So what could be the cause of the distortion? The most likely factor is the fact that the Bitcoin price is down 32% in 12 months. Even when BTC flirted with $48,000 on March 29, futures traders were still unprepared to build bullish positions using leverage.
It is possible to get a “glass half full” reading from the same data because the price of Bitcoin is down 15% since March 29, and yet there is no sign of bearishness from margin and futures trading. BTC. From a derivatives perspective, traders are playing it safe, but they also remain hopeful that $50,000 and up is possible in the short term.
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