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Top Bitcoin Exchanges Lean Cautious in the Short-Term

The majority of traders on top Bitcoin futures exchanges appear to be leaning cautious on Bitcoin’s short-term price trend.

Long and short contract ratios across Bitcoin futures exchanges. Source: Bybt

Data released by cryptocurrency futures trading and information platform Bybt shows more than 50% of traders are shorting Bitcoin.

Why Futures Markets Might Not Be Long Bitcoin

Bitcoin is approaching several key dates as August comes to an end. Typically, during the last week of a month, traders could become more cautious due to futures and options expiration dates.

For instance, CME Bitcoin futures contracts expire on every last Friday of each calendar month. In August, CME futures contracts are going to expire on the 28th. 

According to market data released by Skew, open interest in the CME Bitcoin futures market is hovering at $720 million USD, down from $948 million USD on August 17th. A possible explanation for the decline is the nearing expiry date.

Open interest on the CME Bitcoin futures market. Source: Skew

Around 62,000 Bitcoin options contracts are expiring this week as well, primarily on Deribit, the largest Bitcoin options exchange on the market.

Before futures and options contracts expire, traders either take profit or make adjustments on their positions. Hence, the market is often likely to see a spike in volatility nearing the end of the month. 

Not Bearish on Bitcoin, But Cautious

During the last week of July, the Bitcoin price surged by 11%, and in the last week of May, Bitcoin rose by 8.39%. Based on the longs to shorts ratio, it is difficult to convincingly presume that the market is swaying towards a bearish near-term trend. 

Instead, it is more likely that based on the tendency of Bitcoin to see large upsides or downtrends before the close of a monthly candle, traders are becoming slightly more cautious.

However, not every month end in the past year has resulted in a noticeable increase in volatility. During the last week of June, Bitcoin moved within a tight range of 4.5%, seeing stable price action.

Traders are seemingly cautiously short because of the lack of certainty in the direction of the Bitcoin price in the near-term that coincides with futures and options expirations.

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Joseph Young is a financial analyst based in South Korea. He has covered Bitcoin and the crypto market since 2013. He regularly contributes to the BTC Times, Forbes, and Cointelegraph.