As Bitcoin prices continue to fall, how are pro BTC traders positioned?

Bitcoin (BTC) experienced a stunning price surge of 15.7% in the first six days of December. The surge was largely driven by expectations of the imminent approval of a U.S. cash exchange-traded fund (ETF). Bloomberg ETF analysts said there was a 90% chance of approval by the U.S. Securities and Exchange Commission (SEC) before Jan. 10.

But Bitcoin’s recent price surge may not be as simple as it seems. Analysts failed to take into account several rejections of $37,500 and $38,500 during the second half of November. This rejection has led professional traders, including market makers, to question the strength of the market, especially in terms of derivatives indicators.

Bitcoin’s Inherent Volatility Explains Pro Traders’ Declining Appetite

Bitcoin rose 7.6% to $37,965 on November 15, but the move was completely reversed the next day, disappointing. Likewise, from November 20 to November 21, the price of Bitcoin fell 5.3% after resistance at $37,500 proved stronger than expected.

Corrections are natural even in a bull market, but this explains why whales and market makers avoid taking leveraged long positions in these volatile situations. Surprisingly, despite positive daily candles during this period, buyers using long leverage were forced to liquidate, resulting in losses totaling $390 million over the past five days.

Bitcoin futures premiums on the Chicago Mercantile Exchange (CME) have reached their highest level in two years, suggesting excessive demand for long positions, but this trend does not necessarily apply to all exchanges and customer profiles. In some cases, top traders reduced their long/short leverage ratios to their lowest levels in 30 days. This indicates a take-profit move and reduced demand for bullish bets above $40,000.

By consolidating positions across perpetual and quarterly futures contracts, professional traders can gain clearer insight into whether they are leaning toward a bullish or bearish stance.

Since December 1, top traders on OKX have favored strong long positions by a ratio of 3.8. However, that long position was closed as the price surged above $40,000. Currently, this ratio is at 38%, the lowest level in 30 days due to the strong preference for short selling. These changes suggest that some major players have pulled back from the current rally.

However, the overall market does not share this sentiment. Binance’s top traders made the opposite move. On December 1, the buy preference ratio increased by 16% and has since grown to a 29% position skewed towards the bulls. Nonetheless, the lack of leveraged buying among top traders is a positive sign, confirming that the rally was primarily driven by spot market accumulation.

Related: Canadian cryptocurrency exchange reaches $1 billion in assets under management

Options Data Confirms Some Whales Are Not Buying Rally

To determine if a trader has been caught off guard and is currently holding a short position in the water, analysts should examine the balance between call (buy) and put (sell) options. Increased demand for put options typically indicates that traders are focusing on neutral to bearish pricing strategies.

Bitcoin options data from OKX shows increasing demand for puts compared to calls. This suggests that whales and market makers may not have anticipated the price rise. Nonetheless, traders did not bet on a fall in price as indicators favored call options in terms of volume. Excess demand for put options would have moved the indicator above 1.0.

Bitcoin’s rally toward $44,000 looks healthy because no excessive leverage has been applied. However, some major players were surprised to see an increase in demand for put options while simultaneously reducing leveraged purchases.

With the price of Bitcoin remaining above $42,000 in anticipation of possible approval of a spot ETF in early January, the bulls’ incentive to pressure whales that have decided not to participate in the recent rally is growing stronger.