PANews reported on March 21 that according to Cointelegraph, on March 20, the Bitcoin leveraged long position on the Bitfinex exchange soared to 80,333 BTC (equivalent to $6.92 billion), reaching the highest level in nearly six months. Since February 20, Bitcoin margin long positions have increased by 27.5%, which has triggered market speculation that the 12.5% increase in Bitcoin prices from a low of $76,700 on March 11 may be driven by leverage and may be difficult to sustain.
However, the Bitcoin price does not always move in sync with leveraged long positions on Bitfinex. For example, in the three weeks leading up to July 12, 2024, large investors added 13,620 BTC in margin long positions, but the Bitcoin price fell from $65,500 to $58,000. Similarly, in the two weeks leading up to September 11, 2024, margin long positions increased by 8,990 BTC, while the Bitcoin price fell from $60,000. In the long term, these savvy investors timed the market well, as the Bitcoin price eventually broke through $88,000 in November 2024, while margin long positions were reduced by 30% by the end of the year. In essence, these traders are highly profitable but show higher risk tolerance and patience than the average investor. Therefore, an increase in leverage demand does not necessarily translate into upward pressure on the Bitcoin price.
Additionally, the cost of borrowing Bitcoin remains relatively low, creating opportunities for market-neutral carry trades where traders can take advantage of low interest rates. Currently, the annualized cost of borrowing BTC for 60 days on Bitfinex is 3.14%, while the funding rate for Bitcoin perpetual contracts is 4.5%. In theory, traders can take advantage of this spread through "cash holding carry" without directly taking the risk of price fluctuations.
