Key points to remember:
- Whale’s bullish positioning in the Bitcoin derivatives market fails to counter strong spot selling pressure.
- The slight discount on USDT indicates that capital is shifting to fiat, exposing the leverage risks of Bitcoin futures.
Bitcoin (BTC) fell below $71,000 on Monday for the first time in seven weeks, liquidating $276 million in leveraged bullish positions as traders reduced their positions amid renewed military action between the United States and Iran. Despite this increased risk aversion, whales and market makers have increased their bullish exposure in Bitcoin derivatives markets.
Long to short position of top Bitcoin traders at Binance and OKX. Source: CoinGlass
At Binance, the long/short ratio among top traders jumped to 1.4x from 1.1x a week earlier. These institutional players have gradually accumulated long positions since Bitcoin fell below $76,500 on Tuesday. Meanwhile, OKX’s top traders initially expanded their short positions between Thursday and Sunday, but reversed their trend on Monday as their long-to-short ratio jumped to 1.9x.
Bitcoin futures aggregate open interest on major exchanges, in USD. Source: CoinGlass
Overall open interest in Bitcoin futures on major exchanges stood at $43.5 billion on Monday, remaining flat from the previous week. Despite the forced liquidations, traders did not rush to close their positions at a loss. Nonetheless, further analysis is needed to determine whether bullish traders are relying excessively on leverage to maintain their current positions.
Annualized funding rate of Bitcoin perpetual futures contracts. Source: Lightness
The annualized funding rate for Bitcoin perpetual futures has surpassed the neutral range of 6% to 12% for the first time in over six months. This data suggests growing confidence among bulls, but it also increases the risk of cascading liquidations if Bitcoin’s price continues to fall. However, a modest funding rate of 13% is far from a sign of market desperation.
Bitcoin Spot ETF Outflows Contrast AI Bulls
While Bitcoin’s price weakness can be partially attributed to rising oil prices, the tech-heavy Nasdaq Composite Index posted a 0.5% gain on Monday. Brent crude oil soared to $95 a barrel after U.S. officials said Iran fired two ballistic missiles overnight. Additionally, Israel carried out a military incursion into southern Lebanon this weekend.
Intense investor focus on the AI sector has also contributed to capital outflows from the cryptocurrency market. On Monday, Anthropic, the developer of Claude AI, announced that it had confidentially filed its initial public offering (IPO) prospectus. Separately, Elon Musk’s SpaceX has officially filed its own IPO prospectus.
Related: Dip Bitcoin Buyers Place $500M Bids as Retest of $70,000 Looms
USDT stablecoin/USD on major exchanges. Source: TradingView and Cointelegraph
Tether’s stablecoin USDT has been trading at a slight discount of 0.10% over the past week, signaling capital outflows into traditional fiat currency. This data corresponds to $3.46 billion net exits from US-listed spot Bitcoin ETFs since May 13. Ultimately, heavy selling pressure in spot markets is likely the driving force behind Bitcoin’s recent price correction.
It is still too early to say that professional traders are becoming bullish based solely on the long/short ratio, especially following the recent rise in the perpetual futures funding rate. In the absence of clear evidence of a slowdown in outflows from the cryptocurrency market, traders can remain skeptical of a sustainable uptrend in the short term, despite the relative strength of Bitcoin derivatives data.
