According to Cointelegraph, on March 20th, the Bitcoin leveraged long position on the Bitfinex exchange surged to 80333 BTC (equivalent to $6.92 billion), reaching its highest level in nearly six months. Since February 20th, the long position of Bitcoin margin has increased by 27.5%, which has sparked market speculation that the 12.5% rise in Bitcoin price from the low of $76700 on March 11th may be driven by leverage and may be difficult to sustain.
However, the price of Bitcoin does not always fluctuate in sync with leveraged long positions on Bitfinex. For example, in the three weeks ending July 12, 2024, large investors increased their margin long positions by 13620 BTC, but the price of Bitcoin fell from $65500 to $58000. Similarly, in the two weeks leading up to September 11, 2024, margin long positions increased by 8990 BTC, while Bitcoin prices fell from $60000. In the long run, these savvy investors have seized the market opportunity well, as Bitcoin prices ultimately broke through $88000 in November 2024, while margin long positions decreased by 30% by the end of the year. Essentially, these traders have strong profitability but demonstrate higher risk tolerance and patience than ordinary investors. Therefore, the increase in leverage demand does not necessarily translate into upward pressure on Bitcoin prices.
In addition, the borrowing cost of Bitcoin remains relatively low, creating opportunities for market neutral arbitrage trading where traders can profit from low interest rates. At present, 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 profit from this spread through "cash holding arbitrage" without directly bearing the risk of price fluctuations.
