Bitcoin price drops to $39K, but data shows leverage traders dreaming of $50K
On April 11, Bitcoin (BTC) dropped to $40,500, reaching a crucial level that erased the gains from the previous three weeks when the price peaked at $48,200 on March 28.
According to analysts, the United States Federal Reserve balance sheet reductions are adding pressure to stocks and risk assets, with Bitcoin standing to lose appeal.
Decentrader co-founder filbfilb agreed with these powerful headwinds by arguing that the Fed's action could influence the BTC price trend "for months to come."
Bitcoin reacted unfavorably to a resurgent dollar, with the U.S. dollar currency index (DXY) returning above 100 for the first time since May 2020. While some consider the DXY event a temporary show of strength, its impact on crypto markets was clear.
Margin trading allows investors to borrow cryptocurrency to leverage their trading position with the hope of increasing returns. Traders can borrow Tether (USDT) to open a leveraged long position, whereas Bitcoin borrowers can only short the cryptocurrency because they are betting on its price declining. Unlike futures contracts, the balance between margin longs and shorts isn't always matched.
The above chart shows that traders have been borrowing more USDT recently, a fact shown by the ratio increasing from 9.6 on April 8 to the current 15.9, which is the highest level in two months.
Even though the margin lending reached 5 on March 28, the indicator favored stablecoin borrowing.
Crypto traders are usually bullish, so a margin lending ratio below 3 is deemed unfavorable. Thus, the current level remains positive, just less confident than the previous week.
Related: Bitcoin keeps falling as former BitMEX CEO gives $30K BTC price target for June
The top traders' long-to-short net ratio excludes
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