On-chain data shows that the ratio of bitcoin buying and selling is the highest since February. Here’s what this might mean for the market.
The circulating buy/sell ratio of Bitcoin has been on the rise recently
Analyst at CryptoQuant mail He pointed out that the dealer’s current buying and selling ratio values may indicate an upward trend in the market. The Trader’s Buy/Sell Ratio is an indicator that measures the ratio between a trader’s buying volume and a trader’s selling volume in the Bitcoin market.
When the value of this measure is less than 1, it means that the trader’s selling volume is currently greater than the buyer’s buying volume, which means that the selling pressure is higher in the market. Such a trend indicates that most investors are currently sharing a bearish sentiment.
On the other hand, ratio values above this limit indicate that long volume is overwhelming short volume at the moment, which means that investors are willing to buy the currency at a higher price. Naturally, this trend could indicate that the bullish mindset is the dominant sector.
Now, here’s a chart showing the trend in the 24-day simple moving average (SMA) of bitcoin’s buying and selling ratio over the past few months:
The 24-day SMA value of the metric seems to have been quite high in recent days | Source: CryptoQuant
As shown in the above chart, a sharp spike in the buying and selling volume of the 24-day SMA of Bitcoin has been observed and it has reached some highs above the 1 mark. This means that the buy volume of the taker has significantly exceeded the sell volume of the taker.
The current values of the scale are the highest since mid-February. The only other times this year that similar values were observed were only two instances in January when the rally took off.
Quantum believes that these current high values may indicate an upward trend in the market. However, they remain skeptical, noting that the sudden rise is “largely due to the recent sharp increase in open interest.”
The Open Interest metric tells us the total amount of Bitcoin futures market contracts currently open on derivatives exchanges. The chart below shows the recent trend in this indicator.
Looks like the value of the metric has surged to relatively high values recently | Source: CryptoQuant
As mentioned by the analyst, the open interest in Bitcoin has been increasing rapidly in the past few days, which may explain why the ratio of buying and selling is increasing.
“In other words, while the derivatives market may appear bullish, any position taken will always result in a corresponding trade through settlement (or liquidation),” Quant explains.
It remains to be seen how the market responds to this surge in trader buying volume that has emerged along with the recent bounce in the cryptocurrency price.
BTC price
At the time of writing, Bitcoin is trading at around $27,800, up 4% in the past week.
The asset has enjoyed some rise in the past day | Source: BTCUSD on TradingView
Featured image by Kanchanara on Unsplash.com, charts from TradingView.com, CryptoQuant.com
