At a time when the value of Bitcoin (BTC) is slow to hit the $ 20,000 mark, two categories of people stand out for their attitude in the community. On the one hand, we have the laymen who do not have any assessment tools other than the opinions of specialists that are popping up on the net. In front of them are other much more seasoned observers who know how to interpret the warning signs of a price movement. Traders, since it is them that it is, rely in particular on three main indicators to anticipate these changes. These are the positions of major traders on stock exchanges, premium and futures volume.
The long-short ratio of the best traders to anticipate price changes
The main exchanges often present the long-short ratio of traders working on their platform. Its value naturally varies from one exchange to another as they do not use the same calculation methodologies. So instead of comparing values with each other, traders are more interested in the general variation of this ratio to predict a bullish movement. For example, for favorable long positions this ratio was 1.23 on Binance vs. just 1 on OKEx during the month of November. Thus, sudden changes to ratios of 1 and 0.75 respectively should be considered as unfavorable for long positions in the market and heralding a downward movement.
The difference between futures and spot market prices
The level of bullish bitcoin futures contracts also allows more experienced traders to anticipate possible downward trends. In fact, they like contracts with longer maturities, but with fixed expiration dates. To assess their level, they therefore proceed to a difference between the price of futures and the spot market. This difference is usually in the order ofa premium of 0.5% or more in a bull market. However, we must fear a strong downtrend when the difference becomes zero or negative, a situation known in the industry as backwardation.
The advent of a daily volume well above average
While superior futures keep traders optimistic, the sheer volume of the market is a comfort to their position. Indeed, low volumes usually indicate a lack of confidence and are followed by high levels of resistance. So this assumes thata large trading volume is accompanied over time by a rise in market prices. With nearly $ 3 billion in daily volume observed in November, it would take a lot more to hope to see the price of Bitcoin at the $ 20,000 level.
These three indicators taken together allow the most experienced investors to better appreciate the trends in the bitcoin market. It is important to clarify, however, that this is not an established method for predicting bullish movements with certainty, but rather a direct measure of sentiment among professional traders.