China crypto news pushes market down to critical support
Bitcoin futures data shows bulls slightly more comfortable but still waiting for cheaper BTC
Buying interest saw a minor uptick this week, but the lack of new positions indicates bulls may be waiting for better prices.
Last week’s edition of Futures Friday highlighted the lack of bullish conviction in the market and the possibility of further price erosion until 30,000 USDT levels. We saw that projection play out as the leading digital currency is currently trading around 7.8% lower than last Friday’s high.
Looking at the OKEx futures data this week, we can see some relief in the long/short ratio, but all other indicators remain bearish, including the quarterly contract premium, which is almost nonexistent at this time.
The current quarterly contract BTCUSD0924, expiring at the end of September, is trading at $31,240 with a premium of around $90 (compared to $200 last week), while the BTCUSD1231 contract that expires in December is trading at $31,674 with a premium of around $530 (compared to last week’s $864).
The continued reduction of premiums for these contracts reflects the diminishing optimism in Bitcoins short- to mid-term prospects.
BTC’s spot price is also in a precarious zone, nearing the 30,000 USDT support. If the leading digital currency loses this zone between 29,000 USDT and 30,000 USDT, we could see a sharper drop.
OKEx trading data readings
Visit OKEx's trading data page to explore more indicators. The charts below have orange circles marking their positions in the previous week for comparison.
BTC long/short ratio shows some buying interest at these levels
The long/short ratio saw a general recovery since last Friday, and peaked at 1.41 on Monday, right before the price started sliding again.
However, this time around, the ratio didn’t fall as sharply as previous times and bounced yet again on Wednesday and Thursday, even as BTC continued to drop. The ratio also peaked today at 1.33 but has since dropped to the current 1.23.
This trend shows that retail bulls are more comfortable taking chances at these prices than they were in the weeks prior, and we could see even more buying interest in the market if BTC tests or drops below 30,000 USDT.
The long/short ratio compares the total number of users opening long positions versus those opening short positions. The ratio is compiled from all futures and perpetual swaps, and the long/short side of a user is determined by their net position in BTC.
In the derivatives market, whenever a long position is opened, it is balanced by a short position. The total number of long positions must be equal to the total number of short positions. When the ratio is low, it indicates that more people are holding shorts.
BTC basis nears zero but could result in a reversal in coming weeks
The BTC basis, or premium for the quarterly contract — indicative of mid-term market expectations — has continued to erode over the past weeks and fell under $50 at one point today.
This is a sharp decline considering how the premium was around $200 last week. However, now that the value is reaching extreme lows, we could see a potential reversal in the coming weeks.
It is important to note that while futures are reflective of market sentiment, they are priced based on the current market scenario. This means it is not improbable for BTC to trade significantly higher near expiry than it does today.
This indicator shows the quarterly futures price, spot index price and also the basis difference. The basis of a particular time equals the quarterly futures price minus the spot index price.
The price of futures reflects the traders' expectations of the price of Bitcoin. When the basis is positive, it indicates that the market is bullish. When the basis is negative, it indicates that the market is bearish.
The basis of quarterly futures can better indicate the long-term market trend. When the basis is high (either positive or negative), it means there's more room for arbitrage.
BTC open interest reflects a possible wait-and-watch approach
Open interest is another indicator that shows the market’s confidence, especially if it increases over time. However, we’ve witnessed it stalling since the mid-May crash, and a closer look shows a gradual decrease over the last two Fridays.
Each Friday, the open interest takes a dive as the weekly futures expire, but it recovers over the coming days as new positions are opened. We highlighted this drop last week, and the same is seen today.
However, OI has been making lower lows, as shown on the chart below. It touched $1.32 billion at its lowest last Friday, and it touched $1.3 billion today. This trend shows that traders are generally reluctant to open new positions here and could be taking a wait-and-watch approach until BTC starts finding support around 30,000 USDT.
Open interest is the total number of outstanding futures/swaps that have not been closed on a given day.
Trading volume is the total trading volume of futures and perpetual swaps over a specific period of time.
If there are 2,000 long contracts and 2,000 short contracts opened, the open interest will be 2,000. If the trading volume surges and the open interest decreases in a short period of time, it may indicate that a lot of positions are closed, or were forced to liquidate. If both the trading volume and open interest increase, it indicates that a lot of positions have opened.
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