After bouncing from the recent short-term low, Bitcoin (BTC) price posted a 15% gain over three days as it climbed from $32,400 to $37,200.
This was an impressive move given that BTC price had been trading in a sideways range for weeks and regardless of the reasons behind the surge, one would expect large traders and arbitrage desks to follow the trend.
Interestingly, this is not the case as many of the top traders opened short positions as BTC commenced its 15% move. Even if a trader lacks confidence in a potential retest of the $42,000 all-time high, opening shorts while Ether (ETH) blasts through $1,600 seems risky.
Take notice of how both leading cryptocurrencies tend to trade in tandem most of the time even though investors could be rotating from BTC to Ether due to its role in decentralized finance, explosive price appreciation, and the allure of Eth2 staking.
Data from TheTie, an alternative social analytics firm, also found that Google searches for "buy crypto" had recently hit an all-time high. According to the same source, there's been a 135% surge in cryptocurrency social media activity over the past three months.
Adding to this bullish scenario, global payments giant, Visa announced that it is aggressively pursuing cryptocurrency partnerships, including debit cards and digital banks.
Lastly, a recent 15,200 BTC ($515 million) outflow at Coinbase was deemed a 'bullish signal' by analysts at CryptoQuant. According to CryptoQuant, the outflow indicates an "OTC deal from institutional investors" who are possibly accumulating BTC into cold wallets.
These bullish signals contrast with the exchange-provided traders' long-to-short net positioning. This indicator is calculated by analyzing the client's consolidated position on the spot, perpetual and futures contracts and it provides a clearer view of whether professional traders are leaning bullish or bearish.
With this in mind, there are occasional discrepancies in the methodologies between different exchanges, so viewers should monitor changes instead of absolute figures.
Over the past three days, top traders at every exchange analyzed have increased their shorts. Even though large traders, market makers, and arbitrage desks may hold positions in their cold wallets or Grayscale GBTC funds, the long-to-short ratio shows that there is a lack of confidence on whether BTC will push through $38,000 and pursue the $40,000 level in the short term.
Moreover, the recent outperformance by Ether could have been fueled by top traders reducing BTC exposure. This makes even more sense considering the upcoming CME ETH listing is on Feb. 8. It’s only natural that there would be a surge in appetite among institutional investors.
Top traders could have also moved their BTC off exchange in search of better yield opportunities, so assuming that they’ve all entered short positions is a hasty conclusion.
If these top traders did enter BTC short positions, there would be signs on derivatives markets. To disprove this theory, Friday's $1 billion options expiry still favors bulls, who at the moment have many incentives to push the price above $40,000.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.