A startling number of Bitcoin margin longs recently opened at Bitfinex, but their muted impact on BTC price raises suspicion.
Bitcoin (BTC) investors have sought explanations for the lack of bullish momentum since the spot Bitcoin exchange-traded fund (ETF) initiated trading on Jan. 12. Multiple factors for the absence of bullish price action have been identified, but none are entirely conclusive. Meanwhile, leveraged long positions using BTC margin at Bitfinex have increased to a staggering $3 billion, prompting speculation that Bitcoin whales are preparing for a bull run.
Some analysts, including BitMEX founder Arthur Hayes, believe investors previously expected the U.S. Federal Reserve (Fed) to cut interest rates as soon as March, but recent inflationary events have greatly reduced those odds. Hayes thinks that by not renewing its Bank Term Funding Program (BTFP), the Fed will put U.S. regional banks to the test, draining liquidity from risk markets and negatively impacting assets like Bitcoin.
The longer interest rates remain high, the fewer incentives investors have to exit fixed-income positions. Under this scenario, Hayes predicts that Bitcoin’s price will fall below $35,000 by March–partially explaining the recent bearish momentum. Despite this being a valid hypothesis, it does not explain the resilience of other risk markets such as the SPDR Bloomberg High Yield Bond ETF (JNK), which tracks debt instruments with a riskier profile. Currently, at $95, the JNK ETF is trading 0.5% below its highest level in five months.
