Bitcoin has a tough road ahead. Bullish leveraged positions on the Bitfinex exchange have jumped to a close to six-month high. This massive increase comes in spite of an overall market sentiment that continues to be downbeat. This divergence raises basic questions about whether the recent price increases are sustainable. It also casts a shadow on the overall market’s true optimism.
Bitcoin Longs Reach a 6-Month Peak
Bullish Bitcoin (BTC) positions on the Bitfinex exchange have skyrocketed in the past few days. By March 20, they had hit a record-setting 80,333 BTC, the highest point in almost six months. This is roughly the same as $6.92 billion, indicating another wave of highly-leveraged, bullish speculation on Bitcoin’s upward trajectory. Bitcoin margin longs are up 27.5% since February 20. The recent spike has led to all kinds of wild speculation that this 12.5% price increase – from the recent low of $76,700 on March 11 – is something that won’t stick.
Despite whales gaining more market controlling power via Bitcoin margin longs, the overall market sentiment is still pretty low. This is a very important point that folks have to remember. Bitcoin’s price typically leads on moves the other way, away from bullish leveraged positions on Bitfinex. If true, that would suggest the recent price spike is more vulnerable than it seems.
That said, historically too much confidence has pushed the ratio even higher than 40. Most recently, this has played out in late February when Bitcoin’s price went over $105,000. On the flip side, a ratio under 5 generally indicates a very bearish sentiment.
OKX Data Reflects Shifting Sentiment
Demand for Bitcoin margin longs has collapsed on OKX, down 89% over the same 30-day period. The Bitcoin long-to-short margin ratio on OKX is extremely lopsided at 15 longs for every short. This is the first drop below the level of 20 in over three months — a sign that some traders are losing faith.
In the past, over-optimism has pushed the ratio even higher than 40. Most recently, this was the case in late February, when Bitcoin’s price exceeded $105,000. A ratio under 5 usually indicates a very robust bearish sentiment.
This move might be a sign of retail traders’ bullish sentiment cooling, as they commonly operate on exchanges like OKX. The amendment underscores a potential split in sentiment between layers of the Bitcoin market.
Options Market Shows Neutral Stance
From March 10 to March 18, the Bitcoin options market was showing a bearish market sentiment. Recent data shows that it has recently moved into the territory of a neutral stance.
Puts vs calls 25% delta skew
If traders expect a correction, demand for put (sell) options increases and the 25% delta skew goes above 6%. The 25% delta skew is an important measure that often goes under -6% in strongly bullish periods.
With BTC options pricing implying a BTC bull run is anything but a consensus expectation. This reflects high levels of uncertainty among investors as to what Bitcoin’s short-term trajectory is.
Traders in the options market are split. Though many investors are placing bets on additional upside, the majority of investment capital is remaining risk averse. This combination of negative and positive sentiment further complicates the broader market picture.
