Bitcoin (BTC) has been unable to restore the $24,000 support since Celsius, a popular staking and lending platform, paused withdrawals from its platform on June 13. A growing number of users believe Celsius mismanaged its funds following the collapse of the Anchor Protocol on the Terra Luna ecosystem and rumors of its insolvency continue to circulate.
An even larger issue emerged on June 14 after crypto venture capital firm Three Arrows Capital (3AC) reportedly lost $31.4 million through trading on Bitfinex. Furthermore, 3AC was a known investor in Terra, which experienced a 100% crash in late May.
Unconfirmed reports that 3AC faced liquidations totaling hundreds of millions from multiple positions agitated the market in the early hours of June 15, causing Bitcoin to trade at $20,060, its lowest level since Dec. 15, 2020.
Let’s take a look at current derivatives metrics to understand whether today’s bearish trend reflects top traders’ sentiment.
Margin markets deleveraged after a brief spike in longs
Margin trading allows investors to borrow cryptocurrency and leverage their trading position to potentially increase returns. For example, one can buy cryptocurrencies by borrowing Tether (USDT) to enlarge exposure.
On the other hand, Bitcoin borrowers can short the cryptocurrency if they bet on its price decline, and unlike futures contracts, the balance between margin longs and shorts isn‘t always matched. This is why analysts monitor the lending markets to determine whether investors are leaning bullish or bearish.
Interestingly, margin traders boosted their leverage long (bull) position on June 14 to the highest level in two months.
Bitfinex margin traders are known for creating position contracts of 20,000 BTC or higher in a very short time, indicating the participation of whales and large arbitrage desks.
As the above chart indicates, even on June 14 the number of BTC/USD long margin contracts outpaced shorts by 49 times, at 107,500 BTC. For reference, the last time this indicator stood below 10, favoring longs, was on March 14. The result benefited the counter-traders at that time, as Bitcoin rallied 28% over the following two weeks.
Bitcoin futures data shows pro traders were liquidated
The top traders’ long-to-short net ratio excludes externalities that might have impacted the margin instruments. By analyzing these whale positions on the spot, perpetual and futures contracts, one can…
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