- There was a crucial shift in favor of stablecoin margin BTC contracts.
- Due to BTC’s recent losses, short position traders have become active.
Bitcoins [BTC] The futures market has seen rapid growth over the years, making it one of the most popular crypto derivative instruments among institutional investors. Futures data is commonly used to predict future BTC price movements and gain a better understanding of market sentiment.
Read Bitcoins [BTC] Price prediction 2023-24
Noted on-chain analyst Will Clemente took to social platform Twitter to highlight a rather intriguing trend emerging in the BTC futures landscape. Using data from Glassnode, the researcher drew attention to the steady decline in the number of crypto-collateralized BTC futures contracts open over the past two years.
Source: Glassnode
As can be seen from the chart, the share of cryptocurrency-backed contracts fell from 70% during the peak of the historical bull market in 2021 to just 23% on August 10th. The key takeaway from these insights was a pivotal shift toward stablecoin margin contracts.
How important is it?
It is common knowledge that futures contracts allow traders to speculate on bitcoin price movements without holding the asset. There are generally two types of crypto derivatives available to traders in the futures market – crypto-collateralized and stablecoin-collateralized contracts.
Crypto-collateralized or coin-margin contracts are beneficial for long-term investors because they are settled in the underlying cryptocurrency, in this case Bitcoin. This means they can continue to HODL without having to convert their assets into stablecoins.
On the other hand, stablecoin margin contracts are settled in stablecoins like Tether [USDT]. They are mainly used by short-term oriented traders as they provide a buffer against wild market swings.
As a result, the push to secure leverage using stablecoin collateral indicated a lower likelihood of liquidation cascades. Liquidation cascades occur when a sudden bullish or bearish event results in a forced liquidation of positions and the cascade effect brings down the entire market.
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Downtrends are spreading
Data from CoinMarketCap showed Bitcoin has fallen back to $29,417 at press time after rallying to $30,000 on Aug. 9. The decline had a profound impact on traders’ strategies in the futures market.
According to Coinglass, traders looking to profit from price declines outperformed those profiting from bullish price moves. The long/short ratio tilted in favor of bearish leveraged traders.
Source: Coinglass
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