Bitcoin’s (BTC) price surge of $ 4,700 on November 29 was likely a great relief for holders, but it seems premature to call bottom according to derivative measures.
This should come as no surprise as 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 correction of 22%.
Today’s trend reversal may have been encouraged by MicroStrategy’s announcement that it acquired 7,002 Bitcoin on Monday at an average price of $ 59,187 per coin. The listed company raised funds by selling 571,001 shares between October 1 and November 29, raising a total of $ 414.4 million in cash.
Further bullish news came after German stock operator Deutsche Boerse announced the listing of the exchange-traded note Invesco Physical Bitcoin or ETN. The new product will be traded under the ticker BTIC on Deutsche Boerse’s digital exchange Xetra.
Data shows professional traders are still neutral to bullish
To understand how professional bullish or bearish traders position themselves, you need to analyze the base rate of futures contracts. This indicator is also known as the futures premium and it measures the difference between futures contracts and the current spot market when trading regularly.
Bitcoin quarterly futures are the preferred instruments of whales and arbitrage bureaus. Even though derivatives may seem complicated to retail traders due to their settlement date and the price difference compared to spot markets, the most noticeable benefit is the absence of fluctuating funding rates.
Three-month futures contracts typically trade at an annualized premium of 5-15%, which is considered an opportunity cost for arbitrage trades. By postponing the settlement, the sellers demand a higher price and this causes the price difference.
Notice the 9% low on November 27 as Bitcoin tested the $ 56,500 support. Then, after Monday’s rally above $ 58,000, the indicator came back to a good 12%. Even with this move, there is no sign of excitement, but none of the past few weeks could be described as a bearish period.
Related: Key Data Points Suggest Short Term Crypto Market Correction Is Over
Credit markets provide additional information
Margin trading allows investors to borrow cryptocurrency to take advantage of their trading position, thereby increasing returns. For example, one can buy Bitcoin by borrowing Tether (USDT), thereby increasing exposure. In contrast, borrowing Bitcoin can only be used to sell it short or bet on falling prices.
Unlike futures contracts, the balance between long and short margins is not necessarily equal.
When the loan to margin ratio is high, it indicates that the market is bullish, conversely, a low loan ratio indicates that the market is bearish.
The chart above shows that traders have recently borrowed more Bitcoin, as the ratio fell from 21.9 on November 26 to 11.3 currently. However, the data is bullish in absolute terms as the indicator largely favors the borrowing of stable coins.
Derivatives data shows no excitement from professional traders even though Bitcoin gained 9% from the low of $ 53,400 on November 28. Unlike retail traders, these seasoned whales shy away from FOMO, although the Margin Loan 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 move involves risk. You should do your own research before making a decision.