Bitcoin investors have been puzzled by the lack of bullish momentum in the market despite the launch of the spot Bitcoin exchange-traded fund (ETF) on January 12. While there are several factors that could explain this, none of them are conclusive. However, one interesting development is the increase in leveraged long positions using BTC margin at Bitfinex, which has reached a staggering $3 billion. This has led to speculation that Bitcoin whales are preparing for a bull run.
One possible explanation for the absence of bullish price action is the outflow of funds from the Grayscale GBTC Trust ETF. This has been a cause for concern for Bitcoin investors for some time now. Since January 18, major players in the spot Bitcoin ETF market, including BlackRock, Fidelity, ARK 21Shares, and Bitwise, have captured 84% of the Bitcoin that has left GBTC. However, it seems unlikely that the $87 million average daily net outflow from GBTC alone is responsible for Bitcoin breaking below $40,000 and reaching its lowest levels since December 2023.
Another factor that could be affecting Bitcoin’s price is the expectation that the U.S. Federal Reserve (Fed) would cut interest rates as early as March. However, recent inflationary events have reduced the likelihood of this happening. BitMEX founder Arthur Hayes believes that the Fed’s decision not to renew its Bank Term Funding Program (BTFP) will put U.S. regional banks to the test, draining liquidity from risk markets and negatively impacting assets like Bitcoin. This hypothesis partially explains the recent bearish momentum in Bitcoin’s price, but it doesn’t account for the resilience of other risk markets.
In addition to these factors, the increase in BTC margin longs at Bitfinex is also raising eyebrows. The $3 billion bullish margin position on the exchange has increased by 10% since January 17. However, it appears that these margin trades are market-neutral, meaning that the borrowers are not leveraging their positions with the proceeds. This suggests that there may be some arbitrage involving derivatives instruments or the spot ETF.
Despite these developments, it’s important to note that the rise in Bitfinex BTC margin longs may not have a significant impact on the overall market. The current 74,738 BTC margin longs on Bitfinex far outweigh the 445 BTC margin shorts, which have consistently remained below 2,500 BTC for the past year. The low BTC annual margin funding rate further incentivizes borrowing, even without short-term utility.
Traders should also consider the data from different exchanges to get a clearer picture of the market. For example, the net long-to-short ratio of top traders on OKX and Binance indicates that they remain bullish on Bitcoin’s future performance despite recent price corrections.
It’s important to remember that this article does not provide investment advice or recommendations. Investors should conduct their own research and make informed decisions based on their own risk tolerance and investment goals.