As Prices Consolidate in Spot Markets, Asset Managers Increase Long Positions in Derivative Markets

• Bitcoin prices are pausing after last week’s sharp increase.
• Asset managers appear to believe that prices will rise, and have increased their long positions.
• The recent moderation in prices has accompanied lower-than-average volume.

Bitcoin price action has begun to consolidate, following the 21% increase between June 15 and June 23. While investors appear to be pausing in spot markets, the Commitment of Traders (COT) report shows an increased appetite for long positions within derivative markets.

The COT report, published weekly by the Commodity Futures Trading Commission, details the open interest, and directional position of bitcoin futures traders across institutional categories of various sizes. The report is a proxy for sentiment, as traders disclose the extent to which they are long or short, bitcoin futures.

Long positions spike

The most recent COT report shows that asset managers increased their open long positions by 495 contracts last week. Leveraged funds by comparison, increased their long positions by 1,449 contracts, following a reduction of 538 contracts the week prior.

Asset managers with reportable positions are now 94.87% long bitcoin. This figure has been as high as 99% in prior COT reports. Leveraged funds with reportable positions are now 19.58% long and 80.42% short bitcoin.

The rise in long positions is an understandable reaction to recent market dynamics. The potential approval of a spot bitcoin ETF has given derivative markets the same type of boost that has occurred within spot markets.

The options open interest put/call ratio is 0.32, according to data analytics firm Coinglass. A put/call ratio below 1.0 implies a higher demand for buying than selling.

While not an ironclad sign of where prices are going next, the lack of bearish bets, following a 20% increase, indicates that investors are not looking to sell into the recent rally.

BTC’s chart shows three consecutive negative days prior to today's price action. Trading volume on the down days was below BTC’s 20-day moving average however, indicating that the momentum behind the decline was relatively weak. Some of the decline is a byproduct of decreased weekend trading, but the trend held on Monday as well.

Key levels to watch to the downside are $30,000, as well as $27,800. The $30,000 level marks a growing area of support, as well as a psychologically important level where buy and sell orders are likely to cluster. The $27,800 level coincides with BTC’s current 20-day moving average, which could be a target for traders expecting BTC to revert to its mean.