On June 25, the number of Bitcoin margin shorts on Bitfinex increased by 22,000, which is equal to $ 726 million. At that time, the Bitfinex exchange increased its market share in the spot volume significantly from 9:00 a.m. UTC (16 GMT), thus meeting the demand for short margin.

The data confirms that one (or more) whales have actively sold the market short, betting on the possibility of the price drop. The average price of the trade is around $ 33,000, so any difference of $ 500 when the short position is closed results in a profit or loss of $ 11 million.

In the crypto world, traders tend to believe that in order to build such a large position, a company or group needs some “inside” information in order to protect themselves. However, as mentioned earlier, Bitfinex’s short margin has fallen by $ 65 million since early June, when Bitcoin hit $ 40,400 on June 16.

Bitcoin price in Coinbase, USD (left) vs. BTC short margin at Bitfinex (right) | Source: TradingView

The main difference between margin trading and futures (permanent or quarterly) is that margin traders can use their own bitcoin to complete trades. Therefore, instead of buying it in the market, the player simply informs the exchange that their cash holdings will be used for a short position.

This function is not available on the futures market as the contracts are aggregated. The deposit of 10 Bitcoins on the exchange does not “forego” the short seller’s contract repayment of USD 360,000.

As a result, the short position could have been closed even if Bitfinex’s spot size did not account for the entire $ 900 million trading during that 8-hour period on June 25th.

Total Bitcoin Spot Exchange Volume | Source: Coinalyze

Here, too, there was a margin short closing when the spot volume on Bitfinex increased on June 27th. Therefore, it can be assumed that the companies that closed the previous margin trade did not buy Bitcoin in exchange.

The average price to close a 22,000 bitcoin margin short for 20 hours from the evening of June 26th is $ 32,500. This data shows a potential total profit for trading of $ 11 million. However, it’s worth noting that Bitcoin peaked at $ 32,700 on June 26, so that margin stayed tight and posted a temporary loss of $ 15.4 million.

These traders may have closed their positions when Bitcoin tested the $ 31,500 support, but the price is showing resilience and this may have wiped out most of the profits in the trade. Regardless of the reason for closing short trades, this indicates weakness in the bears or discomfort with holding bear positions below $ 35,000.

Focus on Bitfinex’s BTC stream

According to data from Glassnode, the drop in prices over the past week appears to have sparked “panic” among both long and short term owners, as evidenced by “the volatility of LTH-SOPR and the surrender of STH-SOPR”.

SOPR (Spent Output Profit Ratio) is used to measure the total market profit and loss for any transaction by the change between the selling and buying prices.

SOPR of Short Term (STH) and Long Term (LTH) Bitcoin Holders | Source: Glass knot

“The actual loss of the STH is only slightly less than the surrender event of March 2020. LTH is ready to issue coins with an average cost base between $ 9,200 and $ 16,300 for the week, indicating a high level of volatility.

More detailed information on CryptoQuant’s current market conditions has highlighted BTC inflows and outflows to Bitfinex as a possible measure of market development.

BTC outflow from Bitfinex (red) and BTC price (black) | Source: KryptoQuant

According to CryptoQuant analysis, the market has seen “relatively high inflows of BTC derivatives compared to the spot”, a shift that often means “a turning point” in the market.

The company stressed that the recent spike in average BTC inflow across all exchanges (MA7) “signals an end to large bearish deposits.” This observation is also further supported by the influx of Bitcoin from Bitfinex, which is “believed to be the main culprit in the recent downtrend”.

The increasingly risky situation that bears are currently in was highlighted by trader William Clemente III in the following tweet, which indicates negative funding for 11 consecutive days, meaning that shorts are paying long positions to hold their positions .

Funding has now been negative for 11 days in a row.

Translation: Shorts pay longs to keep their positions open. pic.twitter.com/PkGJ8LGPPz

– William Clemente III (@WClementeIII) June 28, 2021

Although the bulls showed strength yesterday, Bitcoin price stayed below the $ 35,000 resistance level and failed to flip the 20-day moving average to support or secure a daily close above it.

According to data from TradingView, Bitcoin has been trading in a range of $ 33,850 to $ 35,000 since BTC spiked to $ 35,400 on June 28 as the impact of the Chinese BTC mining crackdown on the market spread.

You can see the BTC price here.

Disclaimer: This article is for informational purposes only, not investment advice. Investors should research carefully before making a decision. We are not responsible for your investment decisions.

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