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The main Bitcoin price metric shows that professional traders are nervous and are reaching a level of around $ 19,000

November 21, 2020

Bitcoin (BTC) price hit a new 3-year high this week at $ 18,965, leading investors to expect a new all-time high above $ 20,000.

While these are exciting times, data shows that some professional traders are feeling anxious because the price at these levels and the lack of FOMO for the retail sector are calling for many to pull out heavily.

Data shows that Bitcoin has not fallen more than 5% since September 4th, and in the past 77 days the price of digital assets has increased 84%. The last time a similar price movement was observed was on November 25, 2019.

Price of Bitcoin (USD) in Bitstamp. Source: TradingView
The main Bitcoin price metric shows that professional traders are nervous and are reaching a level of around $ 19,000
The main Bitcoin price metric shows that professional traders are nervous and are reaching a level of around $ 19,000

At that time, BTC moved 47% from $ 6,900 to $ 10,150 in mid-February 2020, a sequence of 86 days. However, we shouldn’t be too quick to say that a move without a 5% daily decline will result in a substantial correction.

Evidence of these different expectations can be drawn from the Basis of futures contracts. Typically the indicator should show an annualized premium of 3% to 10%.

3-month BTC futures contract premium, January 2020. Source: Skew

See how traders were willing to pay an additional 20% on an annual basis to maintain their leveraged positions in February. This is very unusual and a sign of extreme optimism.

On this occasion, The basic indicator is around 10%. From this it can be concluded that the likelihood of customer orders being cascaded is much lower this time.

BTC futures contract premium. Source: Skew

A lack of optimism is a sign of less conviction

Traders were surprised by this unusual trend, and data confirm the lack of conviction. Although the The premium for BTC futures contracts is currently in a bullish zone. this confirms the random purchase.

To effectively measure whether or not professionals have long been during this rally, investors need to look out for it Long / short ratio of professional traders on major cryptocurrency exchanges.

Long / short ratio of Houbi’s professional BTC traders. Source: Huobi

At Huobi, we can see that professional traders were net short when Bitcoin topped $ 16,000 on Nov. 16. On November 19th, some bearish bets appeared when BTC didn’t break the resistance of $ 18,000. Once again, they quickly closed their losses and are currently flat. Hence, we can say that professional traders have tried to guess the local high without much conviction.

Oddly enough Binance data shows professional traders using a different strategy. Even so, the lack of conviction is still seen as can be deduced below.

Binance professional BTC traders long / short ratio. Source: Binance

Binance’s professional traders held a net long position of 10% while Bitcoin surged above $ 16,000. But then they were quick to buy after the price rose above $ 17,500.

While they were still in a bullish position They lowered it significantly when BTC struggled to break above $ 18,000 on November 18.

It is worth noting that exchanges collect data from professional traders in different ways, as there are several ways to measure their clients’ net exposure. Therefore, a comparison between different providers should be based on percentage changes rather than absolute numbers.

Finally, Data suggests that there is some indecision, or at least a lack of conviction, among professional traders.

When the market shows mixed signals There is nothing wrong with standing still and not in one position. At least that is what the smartest traders seem to do.

The views and opinions expressed here are solely those of darer and do not necessarily reflect the views of Cointelegraph. Every investment and business move is associated with risks. You must do your own research when making a decision.