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When it comes to the long-short ratio of Bitcoin, I believe many investors will feel familiar with it, especially those who are very interested in the market analysis of currency circle big guys. Generally speaking, when the currency circle big guys analyze the Bitcoin market, they will Mentioning the term Bitcoin long-short ratio, for example, from December last year to February this year, Bitcoin rebounded from 28195.71 to 61816.23. The long-short ratio of the entire mainstream currency sector has been rising along with the market. At this time, many investors will be confused. , what does the long-short ratio of Bitcoin mean? Below, the editor of the currency circle will explain to you what the long-short ratio of Bitcoin means?

 What does Bitcoin long-short ratio mean?

Long-Short Ratio refers to the ratio of buying to short selling. In fact, buying and selling are originally terms used in the stock industry, but this term is also used in cryptocurrency trading.

Short selling is the act of selling before you buy. For example, the current price of Bitcoin (BTC) is US$10,000. If you expect the price of BTC to fall, then sell BTC while the price is still US$10,000, which is short selling. Later, the price of BTC fell to US$8,000, and you bought at the low price. This is called closing the position. In this way, you can make profit from the price difference.

Buying (Long) is the opposite of selling. It is an act of buying first and then selling. It seems that the current price of BTC is US$10,000, but you predict that the price of BTC will increase in the future. Then buying BTC at a lower price while the price has not yet increased is called buying. Then wait until the price of BTC really rises and becomes $15,000. At this time, you are selling the BTC in your hand, which is called closing the position.

To sum up, short selling is for the decline and buying is for the upside. The principle seems very simple and easy to understand, but whether you make money or not depends on whether your prediction is accurate.

 What do you think of the long-short ratio of Bitcoin?

First of all, the most basic concept, what is the long-short ratio of a contract? It is the ratio of the number of people, or the ratio of the number of accounts, not the ratio of the amount of funds. The ratio of long and short orders in futures contracts is always 1:1
Correspondingly, there are 100 million long orders and 100 million short orders.

In other words, futures contracts are essentially bets between users on the ups and downs. If you open a long order of 100 Bitcoins and the transaction is completed, it means that another person or several other people have opened a total of 100 Bitcoins at this price.
A short Bitcoin order, otherwise how would you close the deal? There must be an opponent. This is basic common sense.

So when you see the long-short ratio in the future, if the long-short ratio is 1.5, don't think that the amount of long funds in the market is greater than the amount of short funds. The total position value of long and short sides is always equal.

If the long-short ratio is 1.5
, then it means that the number of people holding long orders is 1.5 times the number of people holding short orders, but the position value of both parties to the contract is equal, which means that there are more people on the long side and less money per person, so retail investors may account for a larger proportion; on the contrary , there are fewer short sellers and more money per capita, so large players may account for more.

That contract is a market where big fish eat small fish, and retail investors are at risk of being eaten up by big investors. For example, when the long-short ratio is too high and there are too many longs, reverse harvesting may occur, and shorts will violently smash the market to make money. Therefore, many people look at the ratio of the number of people long and short in Bitcoin. In fact, they are looking at the views of large investors on the long and short positions in Bitcoin.

However, please note that these are only theoretical analyses. In the real market, due to the existence of arbitrage, the long-short ratio data is often distorted.

Specifically, because of the existence of various arbitrages, such as arbitrage between futures and spot, cross-platform hedging arbitrage, perpetual contract funding rate arbitrage, etc., this makes the long-short headcount ratio somewhat confusing. , there is no way to reflect investors’ true willingness to go short and long in the market.

The above is the relevant content about what the long-short ratio of Bitcoin means. As we all know, the long-short ratio of Bitcoin is actually the ratio of buying and selling in the futures market. In a normal market, the long-short ratio is generally about 1-1.2. From Bitcoin The long-short ratio of the currency can tell us about the bullish and short sentiment in the market as well as some trends of the main players. If the long-short ratio of Bitcoin is less than 1, it means that there is a larger proportion of short selling. Most people predict that the market will fall more than it rises, and vice versa. The Bitcoin long-short ratio is greater than 1.2, which means that most people in the market believe that the market will rise more than it will fall.