Bitcoin fell from about $60,000 to nearly $50,000 this week, but it has not deviated retail interest, according to Robbie Liu of OKEx.
The investment analyst cited renewed buying activity near the $50,000 level among retail investors, confirmed by the rising long/short ratio and the rising USDT premium in the Asian market. The long/short ratio compares the total number of users opening long positions versus those opening short positions.
Bitcoin climbed by more than 7 percent after testing $50,000-area as its support.
Bitcoin bounces off the $50,000 area. Source: BTCUSD on TradingView.com
Bitcoin Futures Premium
Additionally, he highlighted BTCUSD0326, a large-volumed bitcoin futures contract expiring in June that now trades near the $56,200 levels, about 5 percent higher than Bitcoin’s spot rate. Prices tend to follow futures’ bids.
“Last Friday, the premium of BTCUSD0625 jumped to 8% before quickly retracing,” alerted Mr. Liu. “The premium is now back to 5% levels, indicating weak market expectations regarding the end of June price. However, since the expiration date is still far off, any increase in price could quickly drive up the premium.”
The price of futures reflects the traders’ expectations of the price of Bitcoin. Source: OKEx
The retail interest in Bitcoin climbed with the ongoing de-risking sentiment among institutional investors. Signs of a resurgent US economy, rising bond yields, and nascent inflation prompted investors to rotate out of the so-called pandemic winners, including bitcoin, and seek opportunity in markets that suffered majorly during the coronavirus lockdown.
As a result, manufacturers, banks, and retail sectors outperformed tech stocks. The US dollar index climbed higher, as well, as longer-dated Treasury yields surged.
“Retail investors have seemingly been trying to catch the bottom around the past two days while institutions generally want to de-risk. 50,000 USDT is now becoming a key level to watch,” said Mr. Liu about Bitcoin.
“The current event-driven week is ending on a weak note with all the selling pressure stepping in after the Tesla announcement. However, with the massive options expiry out of the way, we could see BTC move more independently over the weekend,” he added.
Margin Lending Ratio
More support for the $50,000-bottom theory appeared from Bitcoin’s margin lending ratio. It is the ratio between users borrowing dollar-pegged USDT versus borrowing BTC in USDT value over a given timeframe. Typically, traders borrow USDT to buy bitcoin, and those who buy BTC aim to short it.
“The margin lending ratio has also seen a counter-trend rise during the BTC retracement, rising from around 8.5 to a high of 10.5 in the past two days,” said Mr. Liu.
“This also indicates that retail investors are confident about the price floor near 50,000 USDT,” he added.
Photo by André François McKenzie on Unsplash