As bitcoin’s price continues to decline, traders on Bitfinex are buying up the cryptocurrency with borrowed cash, a move that could signal a potential market turnaround.
Since the start of the year, bitcoin holdings bought on margin on Bitfinex have increased by over 13,000 BTC.
Bitfinex Traders Show Confidence in Bitcoin
The number of bitcoin bought on Bitfinex with borrowed cash has risen to more than 60,000 BTC from 50,773 this month. It’s jumped 2% in the past 24 hours alone, according to data from Coinglass and TradingView.
As ‘bitcoin’s (BTC) price wilts,’ traders on crypto exchange Bitfinex are living up to their reputation of being dip buyers, offering some hope to battered crypto bulls given their track record of predicting market peaks and troughs. The increase in so-called margin long positions is a vote of confidence in the largest cryptocurrency, which has lost more than 20% this month and is on track for its worst monthly performance since June 2022.
Margin Long Positions: A Sign of Confidence
Bitfinex traders are mainly whales — or holders of large amounts of bitcoin — who dabble with margin longs. They are known for accurately signaling bitcoin tops and bottoms and tend to accumulate during downtrends or rangebound markets, as they did in the middle of last year. Looking at a five-year timeframe, margin longs have consistently increased holdings during price swoons and reduced exposure near market peaks. This pattern was evident during the 2021 and 2024 market tops.
A margin call is a demand by a brokerage firm for a trader to deposit more funds or securities into their account, typically when the value of their positions falls below a certain threshold.
This happens when the investor's account equity falls below the required maintenance margin, triggering a margin call notice.
The trader must then either deposit additional funds or sell some of their holdings to meet the margin requirements.
Crypto Market Sentiment
As the crypto market tumbles, crypto market sentiment is in a state of extreme fear, according to Coinglass’ Crypto Fear & Greed Index. Over the past year, the market has only seen four days of extreme fear. It’s been dominated by greed and extreme greed for over 230 days.
Crypto market sentiment refers to the overall attitude and emotions of investors, 'traders, and analysts' towards cryptocurrencies.
It is a crucial factor in determining the price movements of digital assets.
Sentiment can be influenced by various factors such as news events, regulatory changes, and social media buzz.
According to a study, 70% of cryptocurrency investors use sentiment analysis to make informed investment decisions.
Additionally, a survey found that 60% of traders rely on social media for market insights.
The Crypto Fear & Greed Index is a market analysis tool that measures investor sentiment in the cryptocurrency market.
It uses a scale of 0 to 100, where '0' represents extreme fear and '100' represents extreme greed.
The index takes into account factors such as price volatility, trading volume, and social media buzz.
A reading above 50 indicates a greedy market, while a reading below 50 suggests a fearful market.
This tool helps investors gauge the overall sentiment of the market and make more informed investment decisions.
