bitcoin (BTC) rallied behind 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 that the worst time for tough economic policies is behind us. .
More good news for risk assets came from the US Personal Consumption Expenditure (PCE) price index, which rose 6.8% in June. The move was the biggest since January 1982, reducing incentives for fixed-income investments. The Federal Reserve focuses on the PCE because of its broader measure of inflationary pressures, measuring changes in the prices of goods and services consumed by the general public.
Additional positive news came from Amazon after the e-commerce giant announced that its quarterly financial results to beat revenue estimated at $119.5 billion by 1.4%. Additionally, Apple released Q2 earnings on the same day, matching analysts’ revenue estimates, while reporting earnings 3.4% above market consensus.
Top traders increased their bullish bets
The data provided by the exchange highlights the net long-short positioning of traders. By analyzing each client’s position on the spot, perpetual and futures contracts, one can better understand whether professional traders lean bullish or bearish.
There are sometimes discrepancies in methodologies between different exchanges, so viewers should monitor changes instead of absolute numbers.
Despite Bitcoin’s 14% correction from July 20 to July 26, top traders from Binance, Huobi, and OKEx increased their leveraged buys. To be more specific, Binance was the only exchange facing a slight reduction in the long/short ratio of top traders from 1.22 to 1.20.
However, this impact was more than offset by OKEx traders increasing their bullish bets from 0.66 to 1.17 in six days. The lack of panic selling after Bitcoin failed to break the $24,000 support on July 20 should be interpreted as bullish.
Had the buyers been over-leveraged or wary of upside potential, the price movement would have done a lot of damage to the long-short ratio.
Margin traders are unwilling to place bearish bets
Margin trading allows investors to borrow cryptocurrency to leverage their trading position, thereby increasing returns. For example, one can buy Bitcoin by borrowing Tether (USDT), thereby increasing their exposure to crypto. On the other hand, borrowing Bitcoin can only be used to short it – betting on falling prices.
Unlike futures contracts, the balance between long and short margins is not necessarily equal. When the margin lending ratio is high, it indicates that the market is bullish – on the contrary, a low lending ratio, signals that the market is bearish.
The chart above shows that investor sentiment bottomed on July 21, with the ratio hitting a four-month low of 8.6. From then on, OKX traders showed less demand to borrow Bitcoin, which was exclusively used to bet on the downward price trend. The ratio currently stands at 13.8, which is rather bullish in absolute terms as it largely favors stablecoin borrowing.
Derivatives data shows no stress from professional traders, even though Bitcoin was trading below $21,000 on July 26. Unlike retail traders, these experienced whales know when to stick to their beliefs and this attitude is clearly reflected in the healthy derivatives data. The data suggests that traders expecting a sharp market correction if Bitcoin fails to breach the $24,000 resistance will be disappointed.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research before making a decision.