LSUR Z Index
What is the LSUR Z Index
The LSUR Z Index represents the weighted LSUR (Long/Short User Ratio) of major cryptocurrencies based on open interest, measured in terms of how many standard deviations it deviates from its 14-day average. For example, a value of -2 means it’s two standard deviations below the average.
(Note: LSUR refers to the ratio of long to short positions in perpetual futures contracts.)
Historically, in the crypto market, an LSUR below 1 indicated that more traders were shorting than longing—typically a sign of overly pessimistic market sentiment. This often marked a potential market bottom, making it a common short-term reversal signal. However, in recent years, this relationship has broken down or even reversed. An LSUR below 1 can now sometimes precede short-term market tops.
The exact reason remains unclear, but CoinKarma hypothesizes that the structural shift is due to the influx of institutional capital and their hedging strategies. Unlike retail investors, institutions often hold large spot positions and hedge them by opening short positions in futures—not necessarily because they’re bearish, but as a risk management tactic. As a result, an LSUR below 1 may no longer reflect extreme bearish sentiment, but rather strategic positioning.
Despite these changes, LSUR still provides valuable insights. Using CoinKarma’s proprietary algorithms, the LSUR Z Index remains a useful tool for gauging short-term market direction.
How to use LSUR Z Index
The LSUR Z Index is best interpreted in conjunction with other CoinKarma indicators. Examples include:
● Spotting Potential Reversal Points with Overall LIQ
In a ranging market, when the LSUR Z Index and Overall LIQ show aligned signals, it can indicate a possible trend reversal.
● Identifying Overextended Conditions with LIQ Indicators
Yellow Box: When both LIQ-related indicators and the LSUR Z Index suggest a potential pullback but the price remains strong, this implies that previously effective reversal signals are weakening. This could be a sign that the market is transitioning from range-bound to trending, and shorting should be avoided.
Purple Box: When the LSUR Z Index drops below -2, use it alongside LIQ indicators to filter out noise and avoid making decisions based solely on LSUR Z Index readings.
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