07 Feb 2022
Binance traders expecting downside?
The long/short ratio at Binance suggests that a majority of the Binance accounts are net short at the moment.
The long/short ratio illustrates the proportion of net long and net short accounts to total accounts with positions. Each account is only counted once. A long account is defined as an account with net long exposure and vice versa.The open interest in these markets is always net neutral. However, it is interesting to understand the current consensus trade to reflect on its implications in the leveraged market.Currently, the long-short ratio in the most popular bitcoin derivative, the stablecoin collateralized perp on Binance, is sitting near all-time lows at 0.743, meaning that a majority of the accounts with exposure in the perp is currently net short.Leverage in the market remains high. The open interest in the BTCUSDT perp on Binance is sitting near all-time highs when denominated in BTC.Before last summer's short squeeze, the long/short ratio sat below 1. Sentiment remained muted until the October rally, when the ratio began to surge towards the long side.Interestingly, as highlighted in the chart, before the April 18th, May 19th, November 26th, December 4th, and January 5th sell-offs, the long-short ratio surged above 4. By monitoring the long/short ratio, you may get opportunities to de-risk ahead of turmoil.The long/short ratio at Bybit also hints that a majority of the Bybit accounts are net short. This, alongside the futures basis and funding rate, suggests that the sentiment among derivatives traders remains bearish at the moment. The crowd at Binance and Bybit have been wrong numerous times before. Will this time be different?