In the past 48 hours, Bitcoin’s (BTC) price has dropped by $13,360 and more than $2.6 billion worth of futures contracts have been liquidated. When including altcoins, the total sum of liquidations equaled $5.9 billion.

After marking a record-high open interest at $19.5 billion on Feb. 21, the metric has stabilized at $16.5 billion. This means that half of the terminated leverage positions have been reopened.

According to the top traders’ long-to-short data and various funding rate indicators, retail traders took the largest hit.

Top traders bought the dip

The top traders’ long-to-short indicator is calculated by using clients’ consolidated positions, including spot, margin, perpetual and futures contracts. Unlike the futures premium or options skew indicators, this metric gathers a broader view of professional traders’ effective net position.

Top traders long-to-short ratio. Source:

Despite the discrepancies between crypto exchange methodologies, analyzing changes over time provides valuable insights.

Top traders at Huobi held a 0.81 long-to-short ratio on Feb. 20, favoring shorts by 19%. By adding net long positions over the following 48 hours, the indicator peaked at 0.95, indicating that buy-side activity prevailed.

OKEx top traders were aggressive net buyers over the past three days. Starting from a 0.86 indicator favoring shorts by 14%, they’ve managed to revert it to a 69% net buyer position.

Lastly, Binance top traders started at 1.36, favoring net longs, but were either liquidated or opened net shorts until reaching the current 1.23 level. Either way, those traders haven’t been adding positions over the past three days.

Overall, the average top traders’ long-to-short position went from 1.01 (flat) on Jan. 20 to the current 1.37 favoring net longs. Therefore, it’s clear that arbitrage desks and whales increased their longs throughout the liquidations.

The reduced funding rate shows retail investors reduced their longs

If top traders are net buyers, then retail must be holding the other end, even if that happened through leveraged long liquidations.

To keep a balanced risk exposure, derivatives exchanges charge either perpetual futures longs (buyers) or shorts (sellers) a fee every eight hours. Known as the funding rate, this indicator will turn positive when longs are the ones demanding more leverage.

On the other hand, periods of fear and heavy selling activity lead to negative funding rate turns. This time around, shorts would be the one paying up.

BTC perpetual contacts funding rate. Source: NYDIG

Since Feb. 6, the average weekly funding rate has exceeded 2.3%. That happened while Bitcoin surpassed $38,000, indicating excessively leverged retail longs. On the other hand, top traders usually opt for fixed-calendar futures in order to avoid the exorbitant funding fees during rallies.

This movement faded completely on Feb. 23 as Bitcoin’s price plunged below $50,000. After briefly flirting with a negative funding rate, it has now stabilized near 0.5% per week. The metric signals that retail traders were liquidated, hence causing the indicator to return to neutral levels.

Although $50,000 sounds like a meaningful psychological level, Bitcoin’s 67% year-to-date gains will likely continue to attract investors. The modest 3% performance from the S&P 500 and a 0.6% yield on  five-year U.S. Treasury Notes offer no match for the potential upside that can be captured from cryptocurrencies.

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.