While cryptocurrency critics say BTC is “pure Ponzi,” Bitcoin traders are increasing their leverage lengths.

Bitcoin (BTC) price has repeatedly tested the $16,000 resistance since the 25% collapse from November 7th to 9th, and some critics will justify their bearish trend by wrongly assuming that the failure of the FTX exchange will have wider implications. correction.

For example, The Economist’s Daniel Knowles says the world’s 26th largest trading asset, with a market cap of $322 billion, is “shockingly useless and wasteful.” Knowles also said that “there is still no logical case for Bitcoin in particular. It’s pure ponzi.”

If you understand, to outsiders, Bitcoin’s price is the single most important indicator of success, regardless of whether it outperforms worldly companies like Nestle ( NESN.SW ), Bank of America ( BAC ), and Coca-Cola ( KO ).

Most people’s need for centralized authority over their money is so strong that the success and failure rate of cryptocurrency exchanges becomes a gatekeeper and indicator of success, when in fact the exact opposite is true. Bitcoin was created as a peer-to-peer money transfer network, so exchanges are not synonymous with acceptance.

It’s worth noting that bitcoin has been trying to rally above $17,000 for the past seven days, so there’s no appetite for buyers above that level. The most likely reason is that investors fear contagion risks similar to those seen with Genesis Block, the last FTX-related victim, which suspended service due to liquidity issues. According to recent reports, the company has announced plans to cease trading and packaging operations.

Bitcoin price is stuck in a downtrend and it will be difficult to shake it, but it is wrong to think that the failure of centralized cryptocurrency exchanges is the main reason for Bitcoin’s downtrend or a reflection of its actual value.

Let’s look at crypto derivatives data to understand investors’ risk aversion to Bitcoin.

Futures markets are bearish and bearish

Fixed-month futures contracts typically trade at a slight premium in regular spot markets because sellers charge more to hold the settlement longer. Technically known as contango, this situation is not unique to crypto assets.

In healthy markets, futures should trade at a 4% to 8% annual premium, which is enough to compensate for the risks and cost of capital.

Bitcoin 2 month futures annual premium. Source: Laevitas.ch

Given the above data, it appears that derivatives traders began to bear down on November 9 as the Bitcoin futures premium reversed, indicating that demand for shorts – bear bets – was extremely high. These data reflect the reluctance of professional traders to add to leveraged long (bull) positions despite the inverted price.

The long-short ratio indicates a more balanced situation

Traders should analyze the long-short ratio of the best traders to rule out externalities that may affect only quarterly contracts. It collects data from exchange clients’ spot positions, fixed and fixed-calendar futures contracts, thus providing better insight into how professional traders are positioned.

There are occasional methodological discrepancies between the various exchanges, so readers should definitely follow the changes instead of the numbers.

The best traders of exchanges Bitcoin long-short ratio. Source: Coinglass

Although Bitcoin failed to break the $17,000 resistance on November 18, professional traders slightly increased their long positions according to the long-short indicator. For example, the ratio of Huobi traders has improved from 0.93 on November 16 and is currently at 0.99.

Related: Crypto Biz, FTX drop leaves blood behind

Similarly, OKX showed a modest increase in its long-short ratio, as the indicator moved from 1.00 in two days to the current 1.04. Finally, the metric remained flat near 1.00 on the Binance exchange. Thus, such data suggests that traders are not bearish after the rejection of the last resistance.

As a result, given the broader analysis of the long-short ratio, it cannot be concluded that the decline in futures shows no evidence of excessively low demand by whales and market makers.

It will likely take some time before investors can discount potential regulatory and contagion risks from the collapse of FTX and Alameda Research. Until then, a sharp recovery in Bitcoin seems unlikely in the short term.