Bitcoin leverage ramps up as BTC’s margin long-to-shorts ratio hits a record $2.5B high
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Crypto traders’ urge to create leverage positions with Bitcoin (
The difference in the cost of leverage could explain the imbalance
The rate for leverage BTC longs at Bitfinex has been almost nonexistent throughout 2023, currently sitting below 0.1% per year. In short, traders should not panic, considering the cost of margin lending remains in a zone that is deemed healthy, and the imbalance is not present in futures contracts markets.
There may be a plausible explanation for the movement, which did not happen overnight. For instance, a possible culprit is the rising cost of stablecoin lending.
Instead of the minimal rate offered for Bitcoin loans, stablecoin borrowers pay 25% per year on Bitfinex. That cost increased significantly in November 2022 when the leading derivatives exchange FTX and their market-maker, Alameda Research, blew up.
As long as Bitcoin margin markets remain extremely unbalanced, traders should continue monitoring the data for additional signs of stress. Currently, no red flags are raised, but the size of the Bitfinex BTC/USD longs ($2.5 billion position) should be a reason for concern.
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This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
