Bitfinex shorts crumble, bears capitulate after Bitcoin holds above $30K

On June 25, the amount of Bitcoin (BTC) margin shorts at Bitfinex increased by 22,000, equivalent to $726 million. At the time, Cointelegraph reported that there was a significant increase in Bitfinex’s spot volume market share starting at 9 am UTC, matching the demand in the short margin.

Data confirms that one (or more) whales actively shorted the market, betting on a price decrease. The average price of the trade was around $33,000, so every $500 difference would result in an $11 million profit or loss when closing the short position.

Related: Why Bitcoin’s next breakout may not be an altcoin season signal

In the cryptocurrency world, traders tend to imagine that for some entity or group to build such a sizable position, there must be some ‘inside’ knowledge to protect them. However, as previously shown by Cointelegraph, the Bitfinex margin shorts from early June were underwater by $65 million when Bitcoin reached $40,400 on June 16.

Bitcoin price at Coinbase, USD (left) vs. Bitfinex BTC Margin Shorts (right). Source: TradingView

The important distinction between margin trading and futures (perpetual or quarterly) is that margin traders might use their own Bitcoin to close the trade. Thus, instead of buying it at the market, one needs only to inform the exchange that his spot holdings should be used to cover the short position.

The same feature is not available at futures markets because the contracts are synthetic. Depositing 10 Bitcoin at the exchange does not “free” a short seller from having to actually buy back the $360,000 worth of contracts.

Therefore, the short position could have been closed even if Bitfinex’s spot volume doesn’t completely account for the $900 million traded during that 8-hour period on June 25.

Bitcoin spot exchanges aggregate volume. Source: Coinalyze

Once again, the margin short close took place as the spot volume on Bitfinex increased on June 27. Therefore, it is reasonable to assume that the entities closing the margin trade did not…

Read More