Bitcoin price continues to drop, but how are pro BTC traders positioned?

Bitcoin (BTC) has experienced a singular 15.7% terms surge successful the archetypal six days of December. This surge has been heavy influenced by the anticipation of an imminent support of a spot exchange-traded money (ETF) successful the United States. Senior Bloomberg ETF analysts person expressed a 90% probability for approval by the U.S. Securities and Exchange Commission, which is expected earlier Jan. 10.

However, Bitcoin’s caller terms surge whitethorn not beryllium arsenic straightforward arsenic it seems. Analysts person failed to see the aggregate rejections astatine $37,500 and $38,500 during the 2nd fractional of November. These rejections person near nonrecreational traders, including marketplace makers, questioning the market’s strength, peculiarly from the position of derivatives metrics.

Bitcoin’s inherent volatility explains pro traders’ reduced appetite

Bitcoin’s 7.6% rally to $37,965 connected Nov. 15 resulted successful disappointment arsenic the question afloat retracted the pursuing day. Similarly, betwixt Nov. 20 and Nov. 21, Bitcoin's terms declined by 5.3% aft the $37,500 absorption proved much formidable than anticipated.

While corrections are earthy adjacent during bullish markets, they explicate wherefore whales and marketplace makers are avoiding leveraged agelong positions successful these volatile conditions. Surprisingly, contempt affirmative regular candles passim this period, buyers utilizing agelong leverage were forcefully liquidated, with losses totaling a staggering $390 cardinal successful the past 5 days.

Although the Bitcoin futures premium connected the Chicago Mercantile Exchange (CME) reached its highest level successful 2 years, indicating excessive request for agelong positions, this inclination doesn't needfully use to each exchanges and lawsuit profiles. In immoderate cases, apical traders person reduced their long-to-short leverage ratio to the lowest levels seen successful 30 days. This indicates a profit-taking question and reduced request for bullish bets supra $40,000.

By consolidating positions crossed perpetual and quarterly futures contracts, a clearer penetration tin beryllium gained into whether nonrecreational traders are leaning toward a bullish oregon bearish stance.

Exchanges’ apical traders BTC long-to-short ratio. Source: Coinglass

Starting connected Dec. 1, OKX's apical traders favored agelong positions with a beardown 3.8 ratio. However, arsenic the terms surged supra $40,000, those agelong positions were closed. Currently, the ratio heavy favors shorts by 38%, marking the lowest level successful implicit 30 days. This displacement suggests that immoderate important players person stepped backmost from the existent rally.

However, the full marketplace doesn't stock this sentiment. Binance's apical traders person shown an opposing movement. On Dec. 1, their ratio favored longs by 16%, which has since accrued to a 29% presumption skewed towards the bullish side. Nevertheless, the lack of leveraged longs among apical traders is simply a affirmative sign, confirming that the rally has chiefly been driven by spot marketplace accumulation.

Related: Canadian crypto exchanges scope $1B successful assets nether management

Options information confirms that immoderate whales are not buying into the rally

To find whether traders were caught off-guard and presently clasp abbreviated positions underwater, analysts should analyse the equilibrium betwixt telephone (buy) and enactment (sell) options. A increasing request for enactment options typically indicates traders focusing connected neutral-to-bearish terms strategies.

BTC options put-to-call volumes astatine OKX. Source: Laevitas.ch

Data from Bitcoin options astatine OKX reveals an expanding request for puts comparative to calls. This suggests that these whales and marketplace makers mightiness not person anticipated the terms rally. Still, traders were not betting connected a terms diminution arsenic the indicator favored the telephone options successful presumption of volume. An excess request for enactment (sell) options would person moved the metric supra 1.0.

Bitcoin's rally toward $44,000 appears healthy, arsenic nary excessive leverage has been deployed. However, immoderate important players were taken by surprise, reducing their leverage longs and showing accrued request for enactment options simultaneously.

As Bitcoin's terms remains supra $42,000 successful anticipation of a imaginable spot ETF support successful aboriginal January, the incentives for bulls to unit those whales who chose not to enactment successful the caller rally turn stronger.

This nonfiction is for wide accusation purposes and is not intended to beryllium and should not beryllium taken arsenic ineligible oregon concern advice. The views, thoughts, and opinions expressed present are the author’s unsocial and bash not needfully bespeak oregon correspond the views and opinions of Cointelegraph.