Between April 25 and May 1, Bitcoin experienced significant price fluctuations, ranging between $27,200 and $30,000. While the 10.5% move may sound alarming and caused $340 million in liquidations of leveraged BTC futures contracts, it is essential to look at the broader picture. Year-to-date, Bitcoin has seen a 72% increase in value, compared to the S&P 500 stock market index’s 9% gains.
During this period, Bitcoin’s bull run took place while the dollar strength index (DXY) was nearing its lowest point in a year, an indicator that investors anticipated further U.S. Treasury interventions amidst the current banking crisis. On May 1, the California Department of Financial Protection and Innovation shut down First Republic Bank, as the latest U.S. bank to collapse, fueling speculation about the Federal Reserve’s upcoming decision on interest rates.
As the interest rate decision may affect the sustainability of Bitcoin’s $28,000 support level, it’s essential to examine derivatives metrics to understand professional traders’ positioning in this increasingly uncertain environment.
Margin markets, which allow professional traders to leverage their positions through borrowing, provide insights into the market’s sentiment. For example, the stablecoin/BTC ratio of margin lending has increased between April 17 and April 30, pointing to leverage as a factor in Bitcoin’s recent gains. However, this optimism appears to have cooled, as the ratio lowered from 43% on April 27 to 32% after the latest correction to $28,400.
Another crucial metric for understanding professional traders’ positions is the long-to-short ratio, which offers more comprehensive information on traders’ positioning across spot, perpetual, and quarterly futures contracts. Although Bitcoin has not been able to break the $30,000 resistance level, professional traders have increased their leveraged long positions using futures.
On crypto exchange OKX, the long-to-short ratio has risen from 0.66 on April 27 to 0.93 on May 1. Meanwhile, Binance has seen the long-to-short ratio increase from 1.12 on April 25 to a peak of 1.26 on April 30, favoring longs.
Despite the 5% price decrease from a high of $29,970 on April 30, bears using futures contracts have not been confident enough to add leveraged shorts. This suggests that even if Bitcoin retests $28,000, bulls should not give up hope, as both margin and futures market indicators remain healthy.
However, the uncertainty surrounding the U.S. banking crisis and potential Federal Reserve decisions could still impact the market significantly in the coming days. Investors should remain cautious and conduct their research before making any financial decisions.