Bitcoin (BTC) rose following the US Federal Reserve’s decision to raise interest rates on July 27. Investors interpreted Federal Reserve Chairman Jeremy Powell’s statement as more dovish than the previous FOMC committee meeting, suggesting the worst time for tightening economic policies is behind us.
Other positive news for risk assets was the US personal consumption expenditures (PCE) price index, which rose 6.8% in June. The move was the largest since January 1982, reducing incentives for fixed-income investments. The Federal Reserve focuses on the PCE because of its broader measure of inflationary pressures, which measures changes in the prices of goods and services consumed by the general public.
Other positive news came from Amazon, after the e-commerce giant reported that its quarterly financial results were 1.4% higher than estimated revenue of $119.5 billion. Additionally, Apple released its second-quarter results on the same day, matching analysts’ revenue estimates, while posting profit 3.4% above market consensus.
Major traders have increased their bullish bets
The data provided by the exchange highlights the net positioning of traders between long and short strategies. By analyzing each client’s position on spot, perpetual and futures contracts, you can better understand whether professional traders are leaning bullish or bearish.
From time to time there are discrepancies in the methodologies of the various exchanges, so viewers should keep an eye on the changes rather than the absolute numbers.
Despite Bitcoin’s 14% correction from July 20 to July 26, top traders Binance, Huobi, and OKEx have increased their leverage long. To be more precise, Binance was the only exchange to face a modest reduction in the long-short ratio of major traders, down from 1.22 to 1.20.
However, this impact was more than offset by OKEx traders who increased their bullish bets from 0.66 to 1.17 in six days. The absence of panic selling after Bitcoin failed to break $24,000 support on July 20 should be interpreted as bullish.
Had the buyers used excessive leverage or been wary of an upside potential, the price move would have done much more damage to the long/short relationship.
Margin traders are unwilling to make bearish bets
Margin trading allows investors to borrow cryptocurrency to leverage their trading position, thereby increasing profits. For example, one can buy Bitcoin by borrowing Tether (USDT), thus increasing their exposure to cryptocurrencies. On the other hand, the Bitcoin loan can only be used to go short, betting on the drop in price.
Unlike futures contracts, the balance between the longs and shorts of the margin is not necessarily even. When the margin loan ratio is high, it indicates that the market is bullish; the opposite, a low loan ratio, signals that the market is bearish.
The chart above shows that investor sentiment bottomed out on July 21, as the ratio hit its lowest level in four months at 8.6. From that moment on, OKX traders showed less demand for Bitcoin loans, used exclusively to bet on the downward price trend. Currently, the ratio stands at 13.8, which is tilted to the upside in absolute terms, as it favors stablecoin lending by a wide margin.
Derivatives data shows no stress from professional traders, even as Bitcoin traded below $21,000 on July 26. Unlike retail traders, these experienced whales know when to stick to their conviction and this attitude was clearly reflected in the healthy derivatives data. The data suggests that traders expecting a strong market correction if Bitcoin fails to break the $24,000 resistance will be disappointed.
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