Bitcoin (BTC) price rallied over 12% on Feb. 15, marking the highest daily close in more than six months. Curiously, the movement happened while gold reached a 40-day low at $1,826, indicating some potential shift in investors’ risk assessment for cryptocurrencies.
A stronger than expected U.S. inflation report on Feb. 14 presented 5.6% growth year-over-year, followed by data showing resilient consumer demand caused traders to rethink Bitcoin’s scarcity value. U.S. retail sales increased by 3% in January versus the previous month — the highest gain in almost two years.
On-chain data indicates that the recent gains can be traced back to a mysterious institutional investor that started buying on Feb. 10. According to Lookonchain’s data, nearly $1.6 billion in funds have flowed into the crypto market between Feb. 10 and Feb. 15. The analysis showed that three notable USD Coin (USD) wallets sent out funds to various exchanges around the same time.
More importantly, news emerged that the Binance exchange is preparing to face penalties and settle eventual outstanding regulatory and law-enforcement investigations in the U.S., according to a Feb. 15 Wall Street Journal report. The exchange’s chief strategy officer, Patrick Hillmann, added that Binance was “highly confident and feeling really good about where those discussions are going.”
Let’s look at derivatives metrics to understand better how professional traders are positioned in the current market conditions.
Bitcoin margined longs entered the “FOMO” range
Margin markets provide insight into how professional traders are positioned because it allows investors to borrow cryptocurrency to leverage their positions.
For example, one can increase exposure by borrowing stablecoins to buy (long) Bitcoin. On the other hand, Bitcoin borrowers can only bet against (short) the cryptocurrency. Unlike futures contracts, the balance between margin longs and shorts isn’t always matched.
The above chart shows that OKX traders’ margin lending ratio increased between Jan. 13 and Jan. 15, signaling that professional traders added leverage long positions as Bitcoin price broke above the $23,500 resistance.
One might argue that the demand for borrowing stablecoins for bullish positioning is excessive as a stablecoin/BTC margin lending ratio above 30 is unusual. However, traders tend to deposit more collateral after a few days or weeks, causing the indicator to exit the FOMO…
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