On Friday, September 27, the BTC long/short ratio on Binance reached 0.73. This figure reflects 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.
The metric’s lowest level in recent memory was 0.59 on February 13. Notably, 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 BTC’s price subsequently fell by around 6% over the following week. A month later, this figure returned to 0.99 on April 8, which was followed by an approximately 11% decline in BTC over 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, leading to a 5% drop in BTC over the week. Again, a ratio of 0.97 on June 6 preceded another 5% decrease in BTC.
Most notably, when this ratio reached a five-month low of 0.79, BTC experienced an 18% crash the following week. Most recently, on August 24, the ratio fell below 1 (at 0.96), and BTC faced an 11% decline in the subsequent week.
The data may appear repetitive, but it underscores a significant pattern: whenever Binance’s BTC long/short ratio falls near or below 1, BTC typically sees a notable drop shortly after. Interestingly, this ratio does not seem as reliable for predicting price bottoms. Out of the last five instances where the ratio climbed above 3.0, only two coincided with local BTC price bottoms.
While correlation does not imply causation, it is certainly a trend worth monitoring.
This article is an excerpt from The Block's Data & Insights newsletter. For more detailed analysis, visit The Block.
Disclaimer: The Block is an independent media outlet that delivers news, research, and data. As of November 2023, Foresight Ventures is a majority investor in The Block. The Block operates independently to provide objective information about the crypto industry.
