Over the last 48 hours, Bitcoin 

BTC

$22,677

 price climbed from $31,000 to $34,800 before reversing course and dropping the majority of these gains. While this $3,800 shift to the downside might not seem significant, the 12% oscillation liquidated $660 million worth of futures contracts.

While it’s unlikely that there will ever be a definitive answer behind the move, on Jan. 25, President Joe Biden voiced his willingness to lower the $1.9 trillion stimulus package. This might have reduced incentives for those buying BTC as an inflation protection or a hedge against U.S. dollar devaluation versus leading global currencies.

Shorter-term charts might not reflect Bitcoin’s bullishness, but several derivatives indicators and the top traders' flow leaves no room for expecting sub-$30,000 prices.

Bitcoin has been testing the $30,800 support, but bulls have shown aggressive buying activity below that level. Not surprisingly, both MicroStrategy and Marathon Patent Group have recently announced sizeable acquisitions.

Data shows that the top traders at OKEx have been heavily buying the dip and the futures contracts premium does not reflect excessive leverage from buyers.

One should keep in mind that the Jan. 29 futures' expiry will extinguish $4.9 billion worth of futures contracts, or 47% of the total $10.5 billion open interest.

Albeit initially worrisome, a large part of those contracts are usually rolled over. These include $1.53 billion at OKEx, $875 million at CME and $840 million at Binance.

Traders who are currently long can buy a longer-term contract while simultaneously closing their January futures position. Thus, regardless of being (or not being) underwater, as long as there's enough margin deposited, both sides can keep their bets open.

While the recent liquidations may have been large, professional traders are not easily shaken by a mere 12% price swing. This hypothesis is especially true considering Bitcoin's 120% annualized volatility.

To understand how whales and arbitrage desks may have positioned themselves during this period, one should analyze the top traders' long-to-short ratio and the futures contracts premium.

Top traders bought the dip

There’s not really a concrete way to gauge a trader's net position effectively, as they could be holding coins in a cold wallet or using multiple exchanges simultaneously.

Furthermore, when combining options with futures contracts, it becomes virtually impossible to interpret an investors' position by solely looking at spot and futures exposure.

Since Jan. 22, top Binance traders held a steady and balanced position, but they started to add longs in the early hours of Jan. 25. This trend continued on Jan. 26, and the indicator currently favors longs by 13%. Currently, the top Binance traders' long-to-short ratio remains below its 1.20 monthly average.

On the other hand, top traders at Huobi averaged a 0.85 long-to-short ratio over the last 30 days, favoring net shorts by 15%. On Jan. 25, as Bitcoin made its $34,800 local top, those traders increased their net shorts to 25%. Therefore, by correctly trading the movement, they could repurchase those contracts at lower prices and currently stand at 0.85, which is their monthly average.

Lastly, top OKEx traders have been aggressively buying since Jan. 25, causing the long-to-short ratio to reach its highest level in 30 days at 2.64. This means longs held 164% larger positions than top traders with negative net exposure. Considering that this happened while BTC dropped from $34,800 down to $31,100, these traders will face serious liquidation risks if markets turn bearish.

The futures premium held through the last three dips

When it comes to the futures premium, traders should expect a 10% to 20% annualized premium (basis) versus regular spot exchanges on healthy markets. This indicator should be comparable to the stablecoins deposits' yields.

Whenever this indicator sustains levels below that range, it should be considered an alarming signal. On the other hand, a sustainable basis above 20% signals excessive leverage from buyers, creating the potential for massive liquidations and eventual market crashes.

The above chart shows the futures premium oscillating near 4.5%, translating to a bullish 22% annualized basis. After the Jan. 20 BTC price crash, the indicator scaled back to 3.3%, and more recently to 2.2% as BTC tested its $31,000 support. The current 12% annualized premium stands at a neutral position.

More importantly, there haven’t been any signs of desperation in derivatives markets. The absence of a futures contracts premium would be easily noticed in such a situation.

Even though the OKEx long-to-short position might seem excessive, the overall market structure is far from being over-leveraged. Thus, even if BTC repeats its Jan. 4 crash test of sub-$28,000 levels, buyers have ammunition left to turn away the short-term bearish tide.

All eyes now should be focused on the $4 billion options Jan. 29 expiry, which currently favors bulls, as Cointelegraph reported. 

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.