Bitcoin's derivatives market is entering September, with split message: traders gaining more positions, but the balance of trading activities is leaning towards price strength.
On September 3, open interest rose to $419 billion, an increase of $1.02 billion over the past month. At the same time, Bitcoin spot prices fell below $110,000.
This shows that while more leverage is playing, convictions in the market are not strong enough to increase the price.
Funding rates further confirm this. In a permanent futures market, traders pay financing fees to those who are short for a long time when leverage demand tilts upward. The daily funding rate on September 3rd was 1.73%, with a seven-day average of 1.21% and a 30-day average of 0.96%.
For the past month, funds have been positive every day. This means that you were paying consistently to maintain your exposure. This creates a costly environment for traders to bet on the other hand, especially when prices aren't moving favorably.
Paying a higher carry cost without price increases will usually force a fast moving account to reduce risk unless something changes the balance.
The trading activity itself explains why prices are heavy. Useful gauges compare the amount of purchase contracts for sales and sales contracts by taker buying and selling ratios. A ratio below 1 means that more traders are actively pressing the sell button.
On September 3rd, the ratio was 0.913, very close to the 30-day average of 0.965.
The net flow from these market orders has firmly denied $98.1 billion over the past month, including -$1.75 billion last week. In other words, traders who moved prices beyond the spread were mostly on sale.
The importance of this is clear from statistics. Over the past 90 days, daily returns have been strongly correlated with net taker flow (0.76) and taker ratio (0.64). In contrast, open profits and funds provided little link to daily returns.
The liquidation data shows where most of the losses came from. Over the past 30 days, a long position of $176.8 billion has been settled, compared to the $8.333 billion shorts. In other words, 68% of liquidation fell to long. The biggest event took place on August 25th, wiping out the $4.32 billion long as Bitcoin fell 3.04% in a day.
The next session saw a rebound of 1.52%. This is a common pattern after major liquidation as the market stabilizes. Another wave of August 29 hit, with a long liquidation of $2.4 billion during a 3.72% drop, followed by a bit of a rebound.
On the short side, August 11th brought in a wipe of $1.61 billion when Bitcoin acquired, followed by another profit the following day. A similar movement occurred. On September 1, the $670 million shorts were liquidated, increasing by nearly 1% a day, with an additional 1.79% extension in the next session.
These episodes show positioning imbalances. As the market is getting longer, pullbacks cause big, long liquidation and quick rebounds. It will cause short wipes, but will be smaller in scale and less frequent.
As long as aggressive transactions continue to come from the selling side, it will be difficult to maintain the rally.
This is also the size of the transaction. Over the past 30 days, total taker flow (total value of market purchases and sales orders) reached approximately $4907.1 billion. In comparison, the $41.9 billion public interest amounts to just 8.39% of recent trading turnovers.
That ratio indicates that the current stock of the location is small compared to recent trends. This means that if sentiment is turned over, it can rapidly expand the position. But for now, the imbalance between those who hold contracts and those who do most aggressively trade has put pressure on the market.
The photos have not changed much in short terms. Last week, Bitcoin fell 0.25% with an additional 2.85% open interest, with net earners flowing to $1.75 billion.
Funding costs rose even further, reaching 1.73% on the last day. Together, these are eager to see more contracts open and pay higher fees to keep them, and traders are still on the seller.
Execution data (taker flow and settlement) is steering return. Open interest and funding show how much leverage is in the system and how expensive it is to hold, but it doesn't drive daily movements.
Therefore, the key signal is someone who is over the spread. A sustained period of more than one taker ratio, combined with the positive taker flow, is the first indication of a shift.
Until then, the market tends to continue with years of liquidation and reflective gatherings, rather than durable profits.
The unusual post is built on a $9.8 billion Bitcoin futures stream and could first appear in Cryptoslate in one way or another.
