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Market analysis is a must-have skill for us if we want to invest in Bitcoin. Many times, when currency circle big guys analyze the Bitcoin market, they will mention the concept of Bitcoin’s long-short ratio. In fact, Bitcoin’s long-short ratio is the investor’s This is a concept we will use when making Bitcoin contracts. As we all know, there are two methods of long and short in contract trading. They are called long orders and short orders of Bitcoin futures contracts respectively. They always correspond to one-to-one, which means there are 100 million long orders. There are 100 million empty orders. The long-short ratio of Bitcoin is a concept related to long and short orders. So what exactly is the long-short ratio of Bitcoin? Let the editor of the currency circle take you to understand the long-short ratio of Bitcoin in an article.

 What is the long-short ratio of Bitcoin?

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’s the ratio of the number of people, or the ratio of the number of accounts, not the ratio of the amount of funds. The long and short orders of futures contracts always correspond to 1:1.

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.

The above content is the detailed answer of the editor of the currency circle to the question of what is the long-short ratio of Bitcoin. In the real market, there will be various arbitrage behaviors, including arbitrage between futures and spot, cross-platform hedging arbitrage, perpetual contract funding rate arbitrage, etc., so the long-short ratio still exists to a certain extent. It is confusing, and there is no way to truly reflect investors' willingness to go short or long in the market. If you want to know the latest market price of Bitcoin, you can actually get the latest market information of Bitcoin in some large digital currency browsers, which also contain information about the ratio of long and short positions in Bitcoin.