Margin Lending Ratio [Okx]
Margin Trading allows investors to borrow cryptocurrencies and leverage their trading position to potentially increase returns. For example, traders may borrow tether (usdt) to increase exposure to BTC.
Definition
OKx provides ratio known as Margin Lending Ratio and define it as "This indicator shows the ratio of cumulative data value between BTC/USDT leverage quote currency (USDT) and underlying asset (BTC) over a given period of time."
This may sound confusing so let's simplify. The BTC margin lending ratio shows how much USDT is borrowed versus how much BTC is borrowed (quoted in USDT) when trading BTC/USDT margin.
If 1000 USDT is borrowed and 500 USDT (in BTC) is borrowed, then the ratio is 1000/500 = 2.
Concept
If the ratio is increasing (let's say from 15 to 25), then this means more USDT is being borrowed in comparison to BTC. Generally, USDT is usually borrowed to increase exposure to BTC and reflects a bullish sentiment.
On the other hand, if the ratio is decreasing, then this means more BTC is being borrowed in comparison to USDT. Generally, BTC is borrowed too short and reflects a bearish sentiment.
The lending ratio provides more edge when compared with how price has behaved over that same time period of borrowing:
USDT is being heavily borrowed (to potentially buy BTC) + price action is flat / decreasing -> leverage traders are in a loss and underwater. This will likely force deleveraging and can create bearish continuation in BTC/USDT price.
BTC is being heavily borrowed (presumingly to short BTC) + price action is flat / increasing -> traders are in a loss and underwater. This will likely force deleveraging and can create bullish continuation (ie. to close a short they have to buy back BTC, creating buy pressure).
Large increases in leverage can also be indication of future volatility.
Similar to retail long/short ratios, what we often see is that when the market has a bullish sentiment, price action becomes bearish and vice versa. So an increasing margin lending ratio may imply that the market is more bullish (since they are borrowing more USDT than BTC, to presumingly buy more BTC), which could lead to bearish price action due to the above reasons.
Where can I find this?
The Margin Lending Ratio [Okx] is found in our main charting application (Tools -> Charts). Within our main charting application, it is found in the Indicators Sentiment Section (as per the image). It is currently available for BTC and ETH across 6 timeframes (1min, 5min, 15min, 1hr, 4hr, 1day).
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