Key Bitcoin Indicator Shows Professional Traders Are Nervous About $19,000

Crazy Review : Last week, the price of Bitcoin rebounded to a three-year high of $18,965, which made investors believe that a new all-time high of more than $20,000 is coming. But the long-short ratio of crypto exchanges shows that top traders are more likely to remain cautious at the current price level.

Last week, the price of Bitcoin rebounded to a three-year high of $18,965, leading investors to believe that new all-time highs above $20,000 are imminent.

While this is exciting news, data shows that some professional investors are getting anxious at these price levels, and the lack of retail FOMO has some advocating for a sharp correction.

Data shows that Bitcoin has not fallen more than 5% since September 4, and the digital asset has risen 84% in the past 77 days. The last time a similar price trend was observed was on November 25, 2019.

At that time, BTC rose from $6,900 all the way to $10,150 in mid-February 2020, a 47% increase over 86 consecutive days. Nevertheless, we should not jump to the conclusion that every rise will be followed by a major correction if there is no 5% daily drop.

Evidence of this divergence in expectations can be gleaned from the futures contract basis, which should typically show an annualized premium of 3% to 10%.

Note that back in February, traders were willing to pay an additional 20% annualized fee to hold a leveraged position. This is quite unusual and a sign of extreme optimism.

This time, the underlying indicator has been around 10%. Therefore, it can be inferred that the probability of a layered sell order liquidation this time is much lower.

Lack of optimism is a sign of weakening faith

Traders were taken aback by this unusual move, and the data confirms their complete lack of conviction. Even though the BTC futures contract premium is currently in bullish territory, that confirms overbought behavior.

To effectively gauge whether professionals have been holding long positions during this rally, investors should monitor the top trader long-short ratio on leading crypto exchanges.

On Huobi, we can see that top traders entered a net short position when Bitcoin broke through $16,000 on November 16. On November 19, some bearish bets emerged as BTC failed to break through the $18,000 resistance level. They again quickly closed their losses and are currently trading flat. Therefore, it can be assumed that professional traders have been trying to guess the local top, but without much convincing.

It is worth noting that data from Binance shows that top traders apply different strategies. Still, this reflects a lack of conviction.

Top Binance traders were 10% net-long when Bitcoin rallied above $16,000, but they then rushed to buy after Bitcoin broke through $17,500.

Although they still maintained a bullish position, they chose to significantly reduce their positions when BTC struggled to break through $18,000 on November 18.

It is important to note that exchanges collect top trader data differently, as there are multiple ways to measure a client’s net exposure. Therefore, any comparisons between different providers should be based on percentage changes rather than absolute numbers.

Ultimately, the data signals that there is some indecision among top traders, or at least a lack of strong conviction.

There’s nothing wrong with staying on the sidelines when the market is sending mixed signals. At least, that’s what savvy traders appear to be doing.