Bitcoin (BTC) has experienced a remarkable rally over the past week, surging over 10% between April 9 and April 14 to reach its highest daily close in more than ten months. Despite macroeconomic headwinds, including a predicted “mild recession” later in 2023 due to the banking crisis, Bitcoin has broken through the $30,000 price barrier. This has led investors to question the sustainability of the current support level, and to examine Bitcoin derivatives metrics to better understand how professional traders are positioned in the current market environment.
Margin markets provide insight into how professional traders are positioned, as they allow investors to borrow cryptocurrency to leverage their positions. The OKX margin lending indicator, based on the stablecoin/BTC ratio, decreased between April 9 and April 11, indicating that no leverage has been used to support Bitcoin’s price gains, at least not using margin markets. Furthermore, the current margin lending ratio of 15 is relatively neutral, given the general bullishness of crypto traders.
The long-to-short metric excludes externalities that might have solely impacted the margin markets, and gathers data from exchange clients’ positions on the spot, perpetual and quarterly futures contracts. Pro traders have kept their leverage long positions unchanged, according to the long-to-short indicator, despite Bitcoin breaking $30,000 for the first time in 10 months. Bitcoin futures traders have not been confident enough to add leveraged bullish positions, indicating that even if Bitcoin price retests $29,000 in terms of derivatives, bulls should be unconcerned because there has been little demand from short-sellers and no excessive leverage from buyers.
The dollar strength index (DYX), which measures the U.S. currency against a basket of foreign exchanges, reached its lowest level in 12 months on April 14, falling to 100.8 from 104.7 one month prior as investors priced in higher odds of further liquidity injections by the Federal Reserve. The latest Federal Reserve’s monetary policy meeting minutes, released on April 12, made explicit reference to the anticipation of a “mild recession” later in 2023 due to the banking crisis. Even if inflation is no longer a primary concern, the monetary authority has little room to raise interest rates further without escalating an economic crisis.
While some analysts may argue that Bitcoin’s recent move justifies a degree of decoupling from traditional markets, both the S&P 500 and gold are near their highest levels in over six months. The contrast between the current economic momentum and the forthcoming recession triggered by higher financing costs and a reduced appetite for risk among lenders causes Bitcoin investors to question the sustainability of the $30,000 support.
Recent macroeconomic data has been mostly positive, however. For example, the European Union’s statistics office reported that industrial production in the 20 member countries increased 1.5% month on month in February, whereas economists polled by Reuters expected a 1.0% increase. Furthermore, China’s latest macroeconomic data showed an encouraging trend, with exports increasing 14.8% year on year in March, snapping a five-month decline and surprising economists who expected a 7% decline. As a result, China’s trade balance for March was $89.2 billion, far exceeding the $39.2 billion market consensus.
Overall, Bitcoin’s market structure remains bullish, with another 10% gain on the table as sellers refrain from shorting. However, readers should monitor changes in Bitcoin derivatives metrics instead of absolute figures, and remember that the views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.