Ethereum traders on the cryptocurrency margin trading platform Bitfinex appear to know something that the rest of the world doesn’t and have amassed a sizeable amount of margin long positions – covering nearly 2% of the entire altcoin’s circulating supply.
But what are the underlying factors that may have traders so significantly bullish on the second-largest cryptocurrency by market cap?
Over 2% of ETH Circulating Supply Locked Up in Margin Long Positions
When cryptocurrency prices were rising during the bull market, a buy and “HODL” strategy was ideal to avoid getting shaken out of the many volatile dips assets like Bitcoin, Ethereum, and Ripple regularly experienced along the way.
But when sentiment flipped on crypto, and a bear market began, crypto traders turned to margin trading platforms in order to short falling prices back to profitability.
However, with hopes that the bear market is nearing its conclusion, crypto traders are once again increasingly taking long positions, expecting prices to rise in the near-term future.
According to data, so many traders on the cryptocurrency margin trading platform, it accounts for 1.8% of the entire Ethereum circulating supply. Over 250,000 ETH in longs have been added in the last 24 hours.
1.975 million ETH (1.8% of total circulating supply) is now marginlong on Bitfinex. Just Bitfinex.
+250k just got filled over the last 4 hours. pic.twitter.com/xOOrxNR8gw
— lowstrife (@lowstrife) April 10, 2020
Why Are Crypto Traders So Bullish on Ethereum?
But what exactly are these bullish crypto traders expecting in the near term from Ethereum that would prompt them to take such a large position in the asset?
Considering the momentum Ethereum had to start off the year, investors could be preparing for yet another powerful recovery after the asset spent the last two years in a downtrend and has reached extremely oversold conditions.
After the last major selloff, the few remaining weak hands may have finally been shaken out, leaving room for Ethereum to finally make up for the ground it lost during its over 90% fall from its all-time high at over $1,400.
With all that upside to recover, traders may simply be eyeing the enormous profit potential.
Ethereum investors also may be particularly bullish considering the continued growth in the decentralized finance industry. With banks already going under, alternative finance could find its cleat in the future and Ethereum has the potential to be the backbone it is built on.
Over 359 companies are building on Ethereum, and it is possible that the smart-contract based altcoin could replace Wall Street’s archaic and aging back end.
Considering all of the potential, it’s easy to understand why so much Ethereum would be locked up in margin longs. However, all of that exposure could be risky.
Positions and open interest across margin trading platforms are often made public information, and when there is an overabundance of positions on one side of the fence, sometimes positions get hunted and price moves in a contrarian way.
That also could be why so many of these longs are on Bitfinex. Bitfinex offers a maximum of 3.3x leverage, while the likes of BitMEX, and PrimeXBT offer up to 100x margin on crypto trades. With added leverage comes more profit, yet more risk for liquidation. At just 3.3x leverage, these traders may prove more difficult to shake out.
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