Data shows that pro bitcoin traders want to feel bullish, but the rally to $23,000 wasn’t enough

Bitcoin (BTC) price had a mixed reaction on Jan. 25 after the United States reported fourth-quarter gross domestic product growth of 2.9%, slightly better-than-expected. Nevertheless, the sum of all goods and services traded between October and December increased by less than 3.2% compared to the previous quarter.

Although somewhat optimistic, another piece of data that dented investor confidence was news that the US Federal Reserve (Fed) would reverse its contractionary measures at any time after US durable goods orders fell 5.6 in December % had increased. The indicator came in much higher than expected, which could potentially mean interest rates could be hiked for a little longer than expected.

Oil prices also remain a focus for investors, with Crude Oil WTI nearing its highest level since mid-September, currently trading at $81.50. The background is the escalation of the Russia-Ukraine conflict after the USA and Germany decided on December 25 to send battle tanks to Ukraine.

The US Dollar Index (DXY), a measure of the dollar’s strength against a basket of top foreign currencies, stayed at 102, near its lowest level in eight months. This signals low confidence in the US Federal Reserve’s ability to contain inflation without triggering a significant recession.

Regulatory uncertainty may also have been instrumental in limiting Bitcoin’s upside potential. Dutch central bank De Nederlandsche Bank has fined cryptocurrency exchange Coinbase $3.6 million for failing to comply with local regulations governing financial services, the news was published on Jan. 26.

Let’s take a look at derivatives metrics to better understand how professional traders are positioned in the current market conditions.

Bitcoin margin longs increase slightly

Margin markets shed light on how professional traders are positioned as they allow investors to borrow cryptocurrency to leverage their positions.

For example, one can increase engagement by borrowing stablecoins to buy bitcoin. On the other hand, Bitcoin borrowers can only short the cryptocurrency if they are betting on a falling price. Unlike futures contracts, the balance between longs and shorts on margin is not always even.

OKX stablecoin/BTC margin lending ratio. Source: OKX

The above chart shows that OKX traders’ Margin Lending Ratio increased slightly from Jan. 20 to Jan. 20, suggesting that professional traders increased leverage long after Bitcoin broke the $21,500 resistance.

One could argue that demand for stablecoin lending for bullish positioning is far lower than the levels recorded in early January. However, a stablecoin/BTC margin borrowing ratio above 30 is uncommon and typically overly optimistic.

More importantly, the current metric of 17 vastly favors stablecoin borrowing and suggests that shorts are not confident in building bearish leveraged positions.

Options traders flirt with a bullish bias

Traders should also analyze options markets to understand if the recent rally has caused investors to become more risk-averse. The 25% delta skew is a telling sign when arbitrage desks and market makers are overcharging for upside or downside protection.

The indicator compares similar call (buy) and put (sell) options and turns positive when fear prevails, as the protective premium of put options is higher than that of risky call options.

In short, the skew metric will hover above 10% as traders fear a bitcoin price crash. On the other hand, general excitement reflects a negative 10% skewness.

Bitcoin 60-Day Options 25% Delta Skew: Source: Laevitas

The 25% delta skew flirted with the bullish bias on January 21, when the indicator touched the minus-10 threshold. The move coincides with the 11.5% surge in BTC price and its subsequent rejection at $23,375. From then on, options traders increased their risk aversion for unexpected price dumps.

Related: Here’s why bitcoin price could correct after US government breaks debt ceiling impasse

Currently, the near-zero delta skew signals that investors are pricing in similar downside and upside risks. On the one hand, the lack of demand from margin traders willing to short Bitcoin seems promising, but at the same time, options traders have not been confident enough to get bullish.

The longer Bitcoin stays above $22,500, the more risky it becomes for those betting on a BTC price decline (shorts). Nonetheless, traditional markets continue to play a significant role in setting the trend, making the likelihood of another price pump before the Fed’s February 1st decision slim.

The views, thoughts, and opinions expressed herein are solely those of the authors and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain any investment advice or recommendation. Every investment and trading move involves risk and readers should do their own research when making a decision.

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