The data shows that Bitcoin traders want bullish sentiment

It seems that despite the growth of the US economy in the last quarter of the year, the market is still worried about the possibility of an economic recession. At the same time, a review of market data shows that despite traders being optimistic about the continuation of the upward trend in the price of Bitcoin, they are waiting to open their long positions until the interest rate announcement on February 1st.

To the report Cointelegraph, Bitcoin price had a mixed reaction to the announcement of 2.9% GDP growth in the US economy in the fourth quarter of 2022. Despite the more than expected economic growth, the total number of new goods and services entered the market between October and December (October to December) has grown by less than 3.2% compared to the previous season.

Another piece of data affecting investor confidence is the possibility that the US Federal Reserve will not resume its contractionary policies anytime soon after the durable goods orders index jumped 5.6% in December. A higher-than-expected increase in this index could potentially mean that interest rates will rise for a little longer.

The price of oil is still the attention of investors, the price of West Texas Intermediate oil has reached its highest level since mid-September and is currently trading in the range of $81.5. The main reason for the price increase is the escalation of conflicts between Russia and Ukraine after the decision of the United States and Germany on December 25 (4) to send battle tanks to Ukraine.

The US dollar index (DXY), a measure of the dollar’s strength against a basket of major foreign currencies, reached 102, which is close to its lowest level in the last 8 months. The decline reflects low confidence in the Fed’s ability to contain inflation without causing a significant recession.

Uncertainty in legislation can also be a fundamental factor in limiting the upward trend of Bitcoin. On January 26, De Nederlandsche Bank, the central bank of the Netherlands, fined cryptocurrency exchange Coinbase $3.6 million for not complying with local regulations for financial service providers.

Examining derivatives market indicators also provides us with a better understanding of the behavior of professional traders in the current market conditions.

The relative increase in long margin trading of Bitcoin

Margin markets offer a glimpse into how professional traders view and navigate the market, as they allow investors to borrow cryptocurrency to increase the value of their trading position.

For example, it can increase the value of a trading position by borrowing stablecoins to buy bitcoins. On the other hand, borrowers who bet on a fall in the price of Bitcoin are opening short trading positions. However, unlike the futures market, the number between short and long margin contracts is not always fixed.

The chart above shows that the ratio of OKX traders’ loan marriage stablecoin to Bitcoin increased slightly from January 20 to January 25 (December 30 to February 5), which indicates that professional traders leveraged trading after breaking the $21,500 resistance of Bitcoin. have increased their length.

Some may argue that the demand to borrow stablecoins to open long positions is much lower than the levels we saw earlier this month. However, a stablecoin to bitcoin margin loan ratio above 30 is unusual and usually too bullish.

More importantly, the current number 17 of this metric means borrowing the stablecoin to open a long position with a large margin, indicating that short traders are not confident in creating bearish leveraged trading positions.

The bias of option traders is also optimistic

Traders should also analyze options markets to see if the recent rally has made investors more risk averse.

The 25% Delta Skew indicator shows that arbitrage traders and market makers are paying a lot of money to prevent the price from rising or falling. This indicator compares similar call option contracts and put option contracts and will become positive with the increase of fear in the market, because the premium for keeping the put option contracts is higher than the risk of losing the call option contracts.

In short, if traders fear a fall in the price of Bitcoin, the delta deviation indicator will move above 10%. On the other hand, the general market excitement for price growth is reflected in the negative delta deviation of 10%.

The optimistic bias of the market on January 21 (Bahman 1) caused the delta deviation of 25% to reach the minus 10 threshold. This movement coincided with an 11.5% increase in the price of Bitcoin and crossing the $23,375 level. Since then, the risk of unexpected price declines has decreased for option traders.

Delta deviation close to zero in the current situation, shows that investors follow the same risks to decrease or increase the price. As a result, while the lack of demand from option traders willing to short Bitcoin looks promising; On the other hand, option traders are not yet confident enough that the market is bullish.