On Friday, Sept. 27, the BTC long/short ratio on Binance reached 0.73. This figure represents the proportion of net long and net short accounts relative to the total accounts of the top 20% of users with the highest margin balance for BTC on Binance over time.
This metric’s lowest level in recent memory was 0.59 on Wednesday, Feb. 13.
It is worth noting that since BTC recorded its all-time high of $73,650 on March 13, whenever this ratio approaches 0.9, it often aligns with local highs in BTC’s price.
For example, the ratio was at 0.9 on March 11, and the price of BTC subsequently fell by around 6% over the following week. A month later, this figure returned to 0.99 on April 8, and the price of BTC fell by roughly 11% in the next seven days.
A similar pattern occurred on May 5 when the ratio reached 1.14 after falling from 3.39 just four days prior, as the price of BTC subsequently fell by about 5% over the week. Again, a ratio of 0.97 on June 6 was followed by another 5% drop in BTC.
Most notably, when this ratio reached what was at the time a five-month low of 0.79, BTC experienced an 18% crash over the following week. Most recently, on Aug. 24, the ratio fell below 1 (at 0.96), and BTC faced an 11% decline in the following week.
The data may seem repetitive, but it highlights a pattern. Whenever Binance’s BTC long/short ratio falls near or below 1, BTC often sees a notable drop shortly after. Even more interesting, though, the ratio doesn’t seem to be as reliable when predicting price bottoms. Out of the last five instances where the ratio climbed above 3.0, only two coincided with local BTC price bottoms.
Of course, while correlation doesn't equal causation, it’s certainly a trend worth keeping an eye on.
This is an excerpt from The Block's Data & Insights newsletter. Dig into the numbers making up the industry's most thought-provoking trends.
Disclaimer: The Block is an independent media outlet that delivers news, research, and data. As of November 2023, Foresight Ventures is a majority investor of The Block. Foresight Ventures invests in other companies in the crypto space. Crypto exchange Bitget is an anchor LP for Foresight Ventures. The Block continues to operate independently to deliver objective, impactful, and timely information about the crypto industry. Here are our current financial disclosures.
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