Bitcoin price drops to a two month low — Did pro traders benefit?

The terms of Bitcoin (BTC) fell by 11.5% from Aug. 16 to Aug. 18, resulting successful $900 cardinal worthy of agelong positions being liquidated and causing the terms to deed a two-month low. Before the drop, galore traders expected a breakout successful volatility that would propulsion the terms upward but this was evidently not the case. With the important liquidations, it's important to code whether nonrecreational traders gained from the terms crash.

There's a communal content among cryptocurrency traders that whales and marketplace makers person an borderline successful predicting important terms shifts and that this allows them to summation the precocious manus implicit retail traders. This conception holds immoderate truth, arsenic precocious quantitative trading bundle and strategically positioned servers travel into play. However, this doesn't marque nonrecreational traders immune to important fiscal losses erstwhile the marketplace gets shaky.

For larger-sized and nonrecreational traders, a bulk of their positions whitethorn beryllium afloat hedged. Comparing these positions with erstwhile trading days allows for estimations connected whether caller movements anticipated a wide correction successful the cryptocurrency market.

Margin longs astatine Bitfinex and OKX were comparatively high

Margin trading lets investors magnify their positions by borrowing stablecoins and utilizing the funds to get much cryptocurrency. Conversely, traders who get Bitcoin employment the coins arsenic collateral for abbreviated positions, indicating a stake connected terms decline.

Bitfinex borderline traders are known for swiftly establishing presumption contracts of 10,000 BTC oregon greater, underscoring the engagement of whales and important arbitrage desks.

As depicted successful the illustration below, the Bitfinex borderline agelong presumption connected August 15 stood astatine 94,240 BTC, nearing its highest constituent successful 4 months. This suggests that nonrecreational traders were wholly caught disconnected defender by the abrupt BTC terms crash.

Bitfinex borderline BTC longs, measured successful BTC. Source: TradingView

Unlike futures contracts, the equilibrium betwixt borderline longs and shorts isn't inherently balanced. A precocious borderline lending ratio signifies a bullish market, portion a debased ratio suggests a bearish sentiment.

OKX USDT/BTC borderline lending ratio. Source: OKX

The illustration supra shows the OKX BTC borderline lending ratio, which approached 35 times successful favour of agelong positions connected August 16. More importantly, this level aligned with the preceding seven-day average. This implies that adjacent if outer factors skewed the metric previously, it tin beryllium deduced that whales and marketplace makers maintained their presumption connected borderline markets earlier the Bitcoin terms illness connected Aug. 16 and Aug. 17. This accusation supports the statement that nonrecreational traders were unprepared for immoderate signifier of antagonistic terms movement.

Futures long-to-short information proves traders were unprepared

The nett long-to-short ratio of the apical traders excludes outer factors that whitethorn person exclusively influenced the borderline markets. By consolidating positions crossed perpetual and quarterly futures contracts, a clearer penetration tin beryllium gained into whether nonrecreational traders are leaning towards a bullish oregon bearish stance.

Occasional methodological disparities among antithetic exchanges exist, prompting viewers to way changes alternatively than fixate connected implicit values.

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

Prior to the merchandise of the Federal Reserve FOMC minutes connected August 16, salient BTC traders connected Binance exhibited a long-to-short ratio of 1.37, aligning with the highest levels observed successful the erstwhile 4 days. A akin signifier emerged connected OKX, wherever the long-to-short indicator for Bitcoin's starring traders reached 1.45 moments earlier the BTC terms correction commenced.

Related: Why did Bitcoin drop? Analysts constituent to 5 imaginable reasons

Irrespective of whether those whales and marketplace makers augmented oregon diminished their positions station the initiation of the crash, information stemming from BTC futures further substantiates the deficiency of readiness successful presumption of reducing vulnerability anterior to August 16, beryllium it successful futures oregon borderline markets. Consequently, a tenable presumption tin beryllium made that nonrecreational traders were taken by astonishment and did not nett from the terms crash.

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.