Despite Bitcoin’s (BTC) price reaching its highest level in over three weeks, traders on Bitfinex reduced their leveraged long (bullish) positions on margin contracts by more than $100 million between April 17 and April 19.
This reduction has led to speculation that Bitcoin whales may be anticipating a price correction or, at the very least, are not confident in further short-term gains. Let’s look closer at whether this could be the case.
Bitfinex Bitcoin whales remain bullish
Bitcoin surged above $86,000 on April 21 after US President Donald Trump openly discussed the possibility of replacing Federal Reserve Chair Jerome Powell. Trump criticized Powell for not acting swiftly enough to ease monetary policy.
Additionally, investors are increasingly risk-off due to concerns about a recession as the global trade war escalates, particularly given the ongoing uncertainty in US-China relations.
The rationale behind this profit-taking in margin markets is especially noteworthy, as Bitcoin’s price has remained below $90,000 since early March, prompting some investors to question the likelihood of a sustainable decoupling from traditional markets.
The S&P 500 index futures are trading 1.1% below their closing price on April 17, and rising political tensions in the US are further eroding investor sentiment.
Bitcoin margin longs on Bitfinex stood flat at 80,400 BTC between April 10 and April 17, indicating strong confidence from bullish traders as this level neared a seven-month high. However, even as BTC’s price reclaimed the $83,000 level, these traders chose to reduce their leveraged bullish positions by 1,250 BTC, equivalent to $106 million.
Historically, Bitfinex traders are known for rapidly opening or closing substantial Bitcoin margin positions, indicating that whales and large arbitrage desks are typically behind these movements.
Nevertheless, it is not accurate to suggest that Bitfinex whales have shifted to a bearish stance, considering their margin longs currently total 79,136 BTC, valued at $6.86 billion, while margin shorts amount to just 326 BTC.
Related: Bitcoin whales absorb 300% of newly mined BTC supply — Is $100K next?
The significant difference between bullish and bearish positions can be attributed to the platform’s notably low 2% annual interest rate. In comparison, traders utilizing two-month BTC futures currently pay a 5.7% annualized premium.
This disparity creates opportunities for arbitrage, as one can open Bitcoin longs on the margin market and simultaneously sell the equivalent position on BTC futures to capture the difference.
BTC doesn’t often move with Bitfinex leverage changes
Furthermore, Bitcoin’s price does not always correlate directly with changes in leveraged positions on Bitfinex. For instance, in the two weeks ending March 10, whales increased their margin longs by 13,454 BTC, yet Bitcoin’s price declined from $95,930 to $67,076 during the same period.
Similarly, margin longs decreased by 11,047 BTC in the two weeks ending Dec. 16, 2024, while Bitcoin’s price rose from $96,200 to $106,400.
However, these sophisticated investors have demonstrated strong market timing over the longer term. For example, Bitcoin’s price eventually dropped below $58,000 on Dec. 23, 2024, after margin-long positions had already been reduced by 26% in the preceding 30 days.
This pattern suggests that these traders are generally highly profitable but also display a significantly higher risk tolerance and patience compared to the average investor.
Ultimately, a $106-million reduction in BTC margin longs is not sufficient evidence to claim that professional traders are turning bearish.
As Cointelegraph reported, onchain data suggests Bitcoin whales have grown in number throughout March and April despite the price slump, suggesting accumulation.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
