The ratio between longs and shorts for bitcoin on Binance Futures has risen to a multi-month high. This metric is considered a barometer of investor anticipation, with a high long-short ratio indicating that more investors have a positive expectation for the bitcoin price.
In the past 24 hours, the long-short ratio has increased sharply to 2.86, according to The Block’s Data Dashboard — despite BTC -0.28% retracing gains made since multiple spot bitcoin exchange-traded funds were approved. The present reading is relatively high, considering that if an equal number of traders were positioned long and short, the reading would be 1.
Last week, before multiple spot bitcoin ETFs were approved, the long-short ratio was at a low of 0.86. However, after approval, the ratio rose, as traders speculated on the asset’s appreciation.
Coinglass data also concurs with that from The Block, showing that more trader positions are long rather than short. The crypto derivatives data analysis platform puts the current long-short ratio for bitcoin positions on Binance Futures at 2.63.
The bitcoin long-short ratio on Binance Futures shows an increase in open long positions. Image: Coinglass
Open trades show higher bullish sentiment
According to Coinglass, a high long-short ratio suggests bullish market sentiment, while a low ratio suggests bearish market sentiment.
The current bitcoin sentiment on Coinglass is weighted towards bullish bets. The distribution of long positions compared to short positions in the last 24 hours indicates that 42% of traders have adopted a bullish stance, whereas only 22% have taken a bearish position. The remaining percentage comprises neutral positions.
Bitcoin sentiment indicator shows the majority of trader positions reflect a bullish perspective. Image Coinglass.
Bull sentiment could become exhausted
Contrarian traders might analyze the current market structure and observe that many have already taken long positions. This cohort of traders might anticipate that the momentum of bullish sentiment is beginning to slow down or level off.
Contrarian trading strategies often involve going against the crowd, assuming that a crowded trade might be nearing exhaustion. These times of crowded trading, such as a relatively high or low long-short ratio, could be followed by a cascade of liquidations if the bitcoin price suddenly swings in a particular direction.
The price of the world’s largest cryptocurrency by market capitalization declined by over 0.3% in the past 24 hours, falling to $42,602 at 7:50 a.m. ET, according to The Block’s Price Page.
