The $ 4,700 rise in the price of Bitcoin (BTC) on Nov. 29 was likely a huge relief for holders, but it seems premature to call the bottom according to derivatives metrics.
This should come as no surprise because the price of Bitcoin is still 15% below the all-time high of $ 69,000 set on November 10. Just 15 days later, the cryptocurrency was testing the $ 53,500 support after a sharp 22% correction.
Today’s trend reversal was possibly encouraged by MicroStrategy’s announcement that it had acquired 7,002 Bitcoin on Monday at an average price of $ 59,187 per coin. The publicly traded company raised money by selling 571,001 shares between October 1 and November 29, raising a total of $ 414.4 million in cash.
More bullish news came after German stock trader Deutsche Boerse announced the listing of the Invesco Physical Bitcoin, or ETN, publicly traded note. The new product will be traded under the ticker symbol BTIC on Deutsche Boerse’s Xetra digital stock exchange.
Data shows professional traders remain bullish-neutral
To understand how bullish or bearish professional traders position themselves, one must analyze the futures base rate. That indicator is also known as the futures premium and measures the difference between futures contracts and the current spot market on regular exchanges.
Quarterly Bitcoin futures are the preferred instruments of whales and arbitrage desks. Although derivatives can seem complicated to retail traders due to their settlement date and the difference in price from the spot markets, the most notable benefit is the lack of a fluctuating funding rate.
Three-month futures generally trade at an annualized premium of 5% to 15%, which is considered an opportunity cost for arbitrage trading. By postponing the sale, sellers demand a higher price and this causes the price difference.
Look at the bottom of 9% on November 27, when Bitcoin tested the support at $ 56,500. Then, after Monday’s rally above $ 58,000, the indicator turned back to a healthy 12%. Even with this move, there are no signs of excitement, but none of the last few weeks could be described as a bearish period.
Related: Key data points suggest that the cryptocurrency market’s short-term correction is over
Credit markets provide additional information
Margin trading allows investors to borrow cryptocurrencies to take advantage of their trading position and thereby increase returns. For example, one can buy Bitcoin by borrowing Tether (USDT), thus increasing exposure. On the other hand, borrowing Bitcoin can only be used to sell it short or bet on the price decline.
Unlike futures contracts, the balance between long and short spreads does not necessarily match.
When the margin loan ratio is high, it indicates that the market is bullish; otherwise, a low loan ratio indicates that the market is bearish.
The graph above shows that merchants have been borrowing more Bitcoin recently, because the ratio decreased from 21.9 on November 26 to 11.3 today. However, the data leans bullish in absolute terms because the indicator favors the indebtedness of stablecoins by a wide margin.
Derivatives data shows zero enthusiasm from professional traders, even as Bitcoin gained 9% from the low of $ 53,400 on November 28. Unlike retail traders, these seasoned whales avoid the FOMO, although the margin lending indicator shows signs of over-optimism.
The views and opinions expressed here are solely those of the Author and do not necessarily reflect the views of Cointelegraph. Every investment and trade movement involves risk. You should do your own research when making a decision.