BTC futures and stablecoin margin data show a lack of appetite from buyers, even as Bitcoin gained 7.5% in a week.
Bitcoin
BTC
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$21,036
rallied on the back of the US stock market’s 3.4% gain on October 28, with the S&P 500 index rising to its highest level in 44 days. Additionally, recently released data showed that inflation may be slowing, giving investors hope that the Federal Reserve will break its pattern of 75 basis point rate hikes after its November meeting.
In September, the US Core Personal Consumption Expenditure Price Index rose 0.5% from the previous month. Although still an increase, it was in line with expectations. These data are the Fed’s primary measure of inflation for interest rate modeling.
Other positive news came from tech giant Apple, which reported weak iPhone revenue on Oct. 27 but beat Wall Street estimates for quarterly revenue and margins. Additionally, Apple CFO Luca Maestri said services grew year-over-year in the fourth quarter.
Bitcoin Futures Data Shows Reluctant Buyers
Quarterly futures are often avoided by retail traders due to their price difference from spot markets. However, they are the preferred instruments for professional traders because they avoid the perpetual fluctuation of contract funding rates.
These fixed-month contracts typically trade at a slight premium in the spot markets as investors require more money to maintain settlement. But this situation is not unique to crypto markets, which is why futures trade at an annualized premium of 4% to 10% in healthy markets.
3 month Bitcoin futures premium. Source: Laevites
Bitcoin’s future premium has been below 2% for the past 30 days, indicating a complete lack of interest from leveraged buyers. Also, there was no significant improvement on Oct 29 when BTC rallied against the $21,000 resistance.
In a nutshell, derivatives traders are far from bullish on the price of Bitcoin despite the low cost of adding bullish positions. However, BTC margin markets should also be analyzed to rule out futures instrument-specific externalities.
Derivatives traders are unwilling to make bullish bets
Margin trading allows investors to borrow cryptocurrencies to leverage their trading position, potentially increasing their returns. For example, one can buy Bitcoin by borrowing Tether.
USDT
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$1.00
, thereby increasing your crypto exposure. On the other hand, borrowing Bitcoin can only be used to short sell it, betting on the price increase.
Unlike futures contracts, the balance between long and short spreads does not necessarily coincide. If the margin loan ratio is high, it shows that the market is bullish; the opposite, a low loan ratio, indicates that the market is bearish.
OKX USDT/BTC margin lending ratio. Source: OKX
The chart above shows that investor morale rose on Oct. 13 when the index hit 23.5, which rarely holds for longer periods. From then on, OKX traders have less demand to borrow Tether, exclusively used to bet on the price uptrend.
However, the ratio is currently at 7.5 and is absolutely bullish as it favors stablecoin lending by a wide margin. It is worth emphasizing that there was no change in sentiment despite Bitcoin’s 7.5% weekly rally between Oct 24-31.
Lack of emotion does not mean pessimism
Derivatives data shows no demand from buyers even as Bitcoin flirts with $21,000 on Oct 29. Unlike traders, these experienced whales tend to anticipate moves by sticking to their convictions even when the markets move in the opposite direction.
The above data suggests that traders expecting Bitcoin to break above $21,000 anytime soon are likely to be disappointed. However, on a positive note, there were no signs that the bears were getting more confident as both futures and margin markets remained neutral to bullish.
The views and opinions expressed in this document are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment move and come
