Bitfinex Bitcoin Travels To $3B – Bullish Or Bearish?
Bitcoin (BTC) investors have sought an explanation for the lack of bullish momentum since trading began on January 12. Several reasons have been identified for the lack of bullish price action, but none are entirely conclusive. . Meanwhile, long positions on Bitfinex using BTC margin have increased to a staggering $3 billion, leading to speculation that Bitcoin Wells is getting ready for a bull run.
GBTC ETF exit and macroeconomic factors are responsible
Some analysts, including BitMEX founder Arthur Hayes, said investors had previously expected the US Federal Reserve (Fed) to cut interest rates as soon as March, but recent inflation events have significantly reduced those odds. By not renewing the Bank Time Funding Program (BTFP), the Fed will challenge US regional banks, drain liquidity from risk markets and negatively impact assets like Bitcoin.
The longer interest rates remain high, the less incentive investors have to exit fixed income positions. In this case, Hayes predicts that the price of Bitcoin will fall below $35,000 in March–partly explaining the recent depression. Although this is a valid hypothesis, it does not explain the resilience of other risk markets, such as the SPDR Bloomberg High Yield Bond ETF (JNK), which tracks debt instruments with risk exposure. Currently, at $95, the JNK ETF is trading 0.5 percent below its five-month high.
Another source of comfort for Bitcoin investors comes from the flow of the grayscale GBTC Trust ETF, although such a risk has been on the radar for a long time, as observed by Cointelegraph on June 30, 2023, since January 18, the position of Bitcoin ETF regulators. Including BlackRock, Fidelity, ARK 21Shares and Bitwise, they took 84% of the equivalent Bitcoin that left GBTC. Basically, the average daily net inflow of $87 million makes it unlikely that Bitcoin will break below $40,000 and reach its lowest level since December 2023.
Adding BTC lengths on Bitfinex is not necessarily a bullish trade
The mystery surrounding the $3 billion Bitcoin bullish margin position on Bitfinex, which has increased by 10% since January 17th, becomes more concerning.
Note the significant increase since January 17th, although it did not affect the price of Bitcoin. This supports the theory that such margin trades are market-neutral because the borrower does not use the position with the income. Most likely, there is some arbitrage involving the underlying instruments or the spot ETF.
Bitfinex's current 74,738 BTC margin longs (positive) exceeds its 445 BTC margin shorts (negative) and has consistently been below 2,500 BTC over the past 12 months. A sub-0.01% BTC annual dividend funding rate contributes to this distortion, creating strong incentives to borrow despite the lack of short-term utility.
RELATED: Bitcoin Sees Biggest Bid Block in 3 Years as BTC Price Drops by $40K
Traders should cross-reference the data to ensure that the anomaly affects only marginal markets, taking into account the risks, rates and availability of each exchange. For example, the net long-to-short ratio of top traders consistently and quarterly consolidates positions in futures contracts, providing clear insight.
On January 17, the top traders in OKX started with a long-to-short ratio of 1.58 and increased until January 22, then reversed when BTC fell below $41,000. Binance data varies, from a long support period of 1.35 on January 17th to a close of 1.39 on January 25th, indicating that top traders haven't turned bullish despite recent Bitcoin price corrections.
The long-term increase in Bitfinex's BTC margin represents an arbitrage with minimal market impact. However, the use of bullish positions dominates the futures and margin markets, indicating traders' confidence in Bitcoin's future performance.
This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.