The location of Bullish Bitcoin (BTC) using leverage in Bitfinex Exchange surged to its highest level in nearly six months, reaching 80,333 BTC on March 20th. A 27.5% increase in Bitcoin margin since February 20th encouraged speculation that a 12.5% ​​BTC price rise from the low of $76,700 on March 11th was driven by leverage, and could not be sustainable.
Bitfinex BTC Margin Longs, BTC. Source: TradingView / Cointelegraph
However, Bitcoin prices do not always move in parallel with Bitfinex’s bullish leverage position. For example, in the three weeks ending July 12, 2024, large investors added 13,620 BTC to their margin long, while the price of Bitcoin fell from $65,500 to $58,000. Similarly, a two-week increase of 8,990 BTC for margin long, up to September 11, 2024, coinciding with a price drop from $60,000.
Bitcoin margin traders are not only extremely profitable, but also risk resistant.
In the long term, these savvy investors surpassed the market timing as Bitcoin price ultimately surpassed $88,000 in November 2024, but by the end of the year, their long margin positions had been reduced by 30%. Essentially, these traders are very profitable, but show much higher risk tolerance and patience than the average investor. Therefore, an increase in leverage demand does not necessarily lead to upward pressure on Bitcoin prices.
Furthermore, the cost of borrowing Bitcoin remains relatively low, creating opportunities for market-neutral arbitrary awards as traders take advantage of cheap interest rates. Currently, if you borrow BTC for 60 days with Bitfinex, the annual cost is 3.14%, while the funding rate for Bitcoin’s permanent futures is 4.5%. In theory, traders can utilize this spread through a “carrying cash” arbitration to make profits without direct contact with price fluctuations.
Even if we assume that most of the $1.48 billion margin long is not arbitrage trading, this means that these large investors are seriously betting on the rise in Bitcoin prices. For example, demand for Bitcoin margin long has been significantly reduced with OKX over the same 30 days.
Long Bitcoin margin ratio in OKX. Source: OKX
OKX’s Bitcoin’s long margin ratio currently shows long, surpassing the 15x shorts, the lowest level in over three months. Historically, excessive confidence has driven this ratio above 40 and recently in late February, when Bitcoin prices skyrocketed above $105,000. Conversely, a ratio below 5 usually indicates strong bearish feelings.
Bitcoin option price balance Risks and negative fluctuations in BTC prices
Bitcoin options should also be analyzed to rule out external factors limited to the margin market. If the trader is anticipating a correction, demand for the Put (selling) option increases, with 25% Delta skew pushing over 6%. Conversely, during bullish periods, this metric is usually below -6%.
Bitcoin 30-day option Delta Skew (Put-Call). Source: laevitas.ch
Between March 10 and March 18, the Bitcoin Options market showed signs of bearish sentiment, but later shifted to a neutral stance. This suggests that whales and market makers are priced at risk for both upward and downward prices. Given the trends in the OKX margin market and current pricing for BTC options, the Bitcoin Bull Run is far from consensus expectations.
Bitcoin’s bullish lack of momentum could be partly attributable to the inflation outlook and forecasts of higher economic growth presented by the US Federal Reserve on March 19th. Concerns about a potential recession exacerbated by the global tariff war have made investors more risk-averse. As a result, whales increase exposure at length of Bitcoin margins, but sentiment across the market remains restrained.
This article is for general informational purposes and is not intended to be considered legal or investment advice, and should not be done. The views, thoughts and opinions expressed here are the authors alone and do not necessarily reflect or express Cointregraph’s views and opinions.
