Bitcoin price continues to decline, but how are pro BTC traders positioned?
Bitcoin (BTC) experienced an impressive 15.7% price increase in the first six days of December. This increase was largely influenced by the pending approval of the spot exchange-traded fund (ETF) in the United States. Bloomberg ETF analysts gave a 90% chance of approval by the US Securities and Exchange Commission, which is expected before January 10.
However, the recent rise in Bitcoin prices may not be as simple as it seems. Analysts failed to account for the multiple declines to $37,500 and $38,500 in the second half of November. These declines have led professional traders, including market makers, to question the strength of the market, especially in terms of starting parameters.
Bitcoin's inherent volatility explains the declining appetite of pro traders.
Bitcoin's 7.6% rally to $37,965 on November 15 led to a disappointment, with the move completely reversing the next day. Similarly, between November 20 and November 21, Bitcoin price fell by 5.3% after the $37,500 resistance was stronger than expected.
While corrections are natural during bull markets, whales and market makers explain why they avoid long positions during these volatile conditions. Interestingly, despite the positive daily candlesticks during this period, long bulls have been aggressively fired, with losses totaling $390 million over the past five days.
Although the premium for bitcoin futures on the Chicago Mercantile Exchange (CME) reached its highest level in two years, indicating excessive demand for long positions, this trend does not apply to all exchanges and client profiles. In some cases, top traders have dropped their long-to-short leverage ratios to 30-day lows. This indicates a profitable move and a reduction in bullish betting interest above $40,000.
By compounding positions in both permanent and quarterly futures contracts, a clearer understanding of whether professional traders tend to be bullish or bearish can be obtained.
Since December 1, OKX core traders have led long positions with a strong 3.8 ratio. But those long positions were closed when the price rose above $40,000. The ratio currently strongly favors shorts at 38%, marking a 30-day low. This change suggests that some significant players have stepped back from the current lineup.
However, not the entire market shares this sentiment. Binance's main traders showed the opposite movement. On December 1, the ratio favored the longs by 16%, which has since turned to the bullish side at 29%. However, the absence of longs used among major traders is a positive sign, confirming that the rally was mainly driven by spot market stocks.
Related: Canadian Crypto Exchanges Reach $1B in Assets Under Management
Options data ensures that some whales do not buy into the lineup
Analysts should examine the balance between calls (buys) and puts (sells) to determine whether traders are holding off guard and short positions are currently underwater. The increasing number of put options indicates that traders are focusing on neutral-to-bearish pricing strategies.
Bitcoin options data on OKX shows increasing demand relative to calls. This shows that these whales and market makers did not anticipate the price rally. Still, traders didn't play on the downside because the index favors call options with volume. An abundance of put (sell) options moves the scale above 1.0.
Bitcoin's rally to $44,000 looks healthy, as no excessive gains have been made. However, some notable players have been taken by surprise, reducing their leverage and showing an increase in demand for simultaneous submissions.
As the price of Bitcoin remains above $42,000 in early January, bulls' incentives to pressure the whales who chose not to participate in the recent rally will intensify.
This article is not intended for general information purposes and should not be construed as legal or investment advice. The views, ideas and opinions expressed herein are solely those of the author and do not necessarily represent the views and opinions of Cointelegraph.
