Bitmex and Bitfinex Funding Hedge and Why I see a $1000 rise today

[adaseb]

Alright I rarely post new topics but what I am seeing is heavy manipulation which will get the longs and shorts both squeezed.

Seems like there are more shenanigans going on with the Bitcoin markets; as usual.

Basically the amount of shorts on Bitfinex keeps growing. So far in less than 24 hours it has increased by 25%. Last time it was this high was back in April 2018. Shorts increasing by 25% makes no sense because most of them are underwater right now and why would so many shorts open up right at the yearly/monthly lows (major support)

Then looking at Bitmex, there is high funding once again.
https://www.bitmex.com/app/fundingHistory

-0.13% just filled and 8 hours prior it was -0.11%

I am thinking this is a repeat of April 12th and June 23rd.

To keep it simple, I will just discuss the events on April 12th.

On April 9-12th, the shorts increased approx from 32.5K to 40.6K (about 20%). During that time the Funding on Bitmex was around ~0.40% daily.


So think about it this way...


Say some whale decides to Long the Bitmex Perps to collect the funding... while at the same time opens equal amount of Shorts on the Bitfinex platform.


From 9th April till April 12th you could of net 0.80% by being in a Long Bitmex Perpetual position.

You now wait until the market dips slightly usually by doing a fake dump/bear trap. Then you are in profit on the Funding and Short position. You are at a loss on the Long position. So what do you do???

You do a crazy market buy and cause price to go up by $1000, at the same time closing your profitable funding and short position in profit. And now magically your Long position is also in profit, so you close that also in profit.

So you made money 3 ways by risking almost nothing just profiting off others losses.


What does everybody think?

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[pooya87]

an interesting theory indeed and i am excited to see what will happen.
we can see the Thor hammer on the charts today though and price has already reversed to ~$6300 so maybe we are on the way to $1000 rise after all.

shorts are basically a gamble in my opinion and these gamblers saw the bloodshed in altcoin market where every coin lost about 20% and seeing the pressure on bitcoin they thought bitcoin is going to fall too. and falling below $6k could potentially mean a big drop so it wasn't a pure random gamble.
but it didn't happen because $6k was stronger than they thought it would be.

[davis196]

This is exactly what I would do,if I had 500 million USD to invest in cryptocurrencies...but I don't have 500M 
Damn,most traders are like sheep.They see the prices doing down,they expect a price dump/bear trap and they start shorting.Why don't they just HODL.I'm not that familiar with shorting,but aren't there some big fees occuring ,if you short your cryptos?

[talkbitcoin]

This is exactly what I would do,if I had 500 million USD to invest in cryptocurrencies...but I don't have 500M 
Damn,most traders are like sheep.They see the prices doing down,they expect a price dump/bear trap and they start shorting.Why don't they just HODL.I'm not that familiar with shorting,but aren't there some big fees occuring ,if you short your cryptos?

many are already holding. it is not everyone who does these weird things in the market. and those who do are hoping to increase the amount of bitcoin they own by taking advantage of every small market fluctuations. many are newbies and lose because they fall for they FUD and the rest make profit from their mistakes...

[nl247]

This is exactly what I would do,if I had 500 million USD to invest in cryptocurrencies...but I don't have 500M 
Damn,most traders are like sheep.They see the prices doing down,they expect a price dump/bear trap and they start shorting.Why don't they just HODL.I'm not that familiar with shorting,but aren't there some big fees occuring ,if you short your cryptos?

Leverage trading to me is more or less a huge gamble and the annoying part like the OP stated is that this is like the biggest spot for manipulations. I have never bothered myself with it and I never will. Better to trade normally without having to go the leverage way and follow the trend, even if they do not want to HODL. Imagine the number of positions leverage traders will end up being squeezed out from in occasions like this.

[sunanbonang]

This is exactly what I would do,if I had 500 million USD to invest in cryptocurrencies...but I don't have 500M 
Damn,most traders are like sheep.They see the prices doing down,they expect a price dump/bear trap and they start shorting.Why don't they just HODL.I'm not that familiar with shorting,but aren't there some big fees occuring ,if you short your cryptos?

Short-term investment has a very large risk, when you buy at a low price and sell it when the price rises slightly the biggest possibility is that prices will continue to rise or prices will go down before you sell.

[LFC_Bitcoin]

OP, your theory seems plausible & explained by yourself very thoroughly. I think you could be right. I mean yesterday the price just seemed obviously manipulated imo, it was clinging onto 6k for dear life. Sideways action within a range of literally about 80 USD all day, just seemed so controlled.

[Tytanowy Janusz]

-0.13% just filled and 8 hours prior it was -0.11%

Correct me if im wrong -0,13 % funding on bitmex means that shorts are getting payd by longs. That means that holding SHORT on bitmex gives you funding holding LONG on bitmex takes funding from you. That means that to collect funding on bitmex you will have to have opened short possition (then long on bitfinex) what doesnt apply to short position increase on bitfinex that you mentioned.

Now trading for funding in my opinion is profitable for small/medium invesotrs which transaction dasnt push price. Beeing whale is not that easy. You said open long on bitmex and short on bitfinex - how? In the same moment? he will push bitmex price up and bitfinex price down, price difference will make other invesotrs to eat that but i think it will be more expensive that those 0,8% of investment from funding.

Having long and short opened. In your statement - closing short (pushing price up) and closing long with profit. Well closing short while pushing price up will become less and less profitable while price increase. Also closing long will become less and less profitable while realising it with price decrise (the only profit is when fomo will help to close long without dumping price). Isnt it the same as just open long and close long (open long pushing price higher and then closing long pushing price down) - again only fomo will help to profit on this trade?

The only advantage of this strategy is those 0,8% from funding and I think it is not enought for whale to open that huge position (opening it is more expensive especcialy that in your strategy possitions are doubled that in normal buy/sell long) but i would love to discuss more about that.

[dothebeats]

And to think that we went under $6000 yesterday and shortly thereafter a rebound towards $6300 makes me think that something's up. While I don't understand the technicalities of trading that much, it appears that it is somewhat manipulated on the exchanges rather than in the whole markets. Everyone is on the shorting craze yesterday and someone must have thought that it's a good idea to chime in and disrupt whatever party it is that they're having. I for one thinks that the last major resistance is $5500 and if that's broken, all hell would break loose. Guess bears would have to try a lot harder in order to fully own the market.

[BrewMaster]

OP, your theory seems plausible & explained by yourself very thoroughly. I think you could be right. I mean yesterday the price just seemed obviously manipulated imo, it was clinging onto 6k for dear life. Sideways action within a range of literally about 80 USD all day, just seemed so controlled.

i don't think we can call yesterday price a good example of manipulation in bitcoin market. we have had much more severe cases of manipulation in the past. yesterday it was mostly the fear that was initiated by the altcoins coming to bitcoin and failing to do much.
of course there were whales who were dumping to see $5000 and below but they failed because the "force" was strong

[adaseb]

-0.13% just filled and 8 hours prior it was -0.11%

Correct me if im wrong -0,13 % funding on bitmex means that shorts are getting payd by longs. That means that holding SHORT on bitmex gives you funding holding LONG on bitmex takes funding from you. That means that to collect funding on bitmex you will have to have opened short possition (then long on bitfinex) what doesnt apply to short position increase on bitfinex that you mentioned.

Now trading for funding in my opinion is profitable for small/medium invesotrs which transaction dasnt push price. Beeing whale is not that easy. You said open long on bitmex and short on bitfinex - how? In the same moment? he will push bitmex price up and bitfinex price down, price difference will make other invesotrs to eat that but i think it will be more expensive that those 0,8% of investment from funding.

Having long and short opened. In your statement - closing short (pushing price up) and closing long with profit. Well closing short while pushing price up will become less and less profitable while price increase. Also closing long will become less and less profitable while realising it with price decrise (the only profit is when fomo will help to close long without dumping price). Isnt it the same as just open long and close long (open long pushing price higher and then closing long pushing price down) - again only fomo will help to profit on this trade?

The only advantage of this strategy is those 0,8% from funding and I think it is not enought for whale to open that huge position (opening it is more expensive especcialy that in your strategy possitions are doubled that in normal buy/sell long) but i would love to discuss more about that.

You have it the other way around. When its negative it means shorts pay longs. So if you are long you get the funding rate from the shorts.

Go to www.bitmex.com and hover your mouse over the funding rate and it says that.

So far the funding rate is only 0.40% if he opened the longs a few days ago.


If you look at the Bitfinex shorts chart almost 10K new shorts opened, lets say that only 5K is this individual.

5000 BTC is around $30,000,000 of contracts on Bitmex so the 0.40% only results in $120K but keep in mind this funding rate can stay this way for the next few days.

I think the play here is too, load up on longs, load up on shorts.

Create a huge dump and get people to go short more, creating negative funding for him and causing price to go down. When it goes down, his Bitfinex short is at a profit. Then when liquidity is very low, he will market buy all those 5K back.

For example, looking at the order books for Bitfinex a 5000 BTC market buy right now would cause price to go from 6400 to 7200. However since others would buy and other shorts could have to cover it might end up being in a 10000 BTC market buy which would take price all the way too $17,000.

$17K obviously won't happen but keep in mind everybody and their Grandmother is short Bitcoin right now. So there could be huge squeezes either way.

That and there was also that huge 18000 BTC sent to a Bitmex deposit address. So there is obviously something going down soon.

[BitHodler]

I for one thinks that the last major resistance is $5500 and if that's broken, all hell would break loose.

Dip below $5700 is enough to see $5000s from where we can only hope that it won't drop further.

I initially didn't pay attention to Arthur Hayes's $5000 prediction, but it might hold a bit more weight than most of us here think, especially with how he pointed out that he doesn't care about the price as long as it is volatile.

If you want to create a crazy volatile market where everyone goes nuts, you only have to break $5700 and the panic will be complete. If it drops to $5000 and below, it could as easily drop to $3000 as final bottom.

I'm glad I just hodl and dollar cost average. Trying to trade this market is pretty much a one way ticket to nothing but severe losses.

[pitiflin]

I found it funny, when people were like the support levels at 6k were really strong and then you read this theory be like "Oh yeah, this definitely could have happened."

This theory ,as crazy as it seems, its doable and has been done in similar sort in the stock markets.

I am really happy that I didn't trade for a while, and took my hands off, because I'd rather just keep what I have than losing what I have.

[adaseb]

Alright well so far my theory hasn't worked out.

So I am spitballing here but here is what I think "might" happen. Don't trade on this info. This is just for entertainment.

Looking at the daily charts, we are in a 7 day inside bar day. Basically between $6630 and $5860.

Many shorts have closed but that large whale short most likely hasn't closed as he is still is making money off the funding rate.

I think we will get a false break at $6630 in the next day or so. This will set off massive amount of stop-losses and buy-stops will get triggered. We might reach $6700 or $6800 and it will quickly end up closing as a wick.

Then we will head and retest the $5860 area and again, it will break a little, set off many stop-losses and sell-stops maybe hit $5800 or $5700 or $5600.

Then....

The massive whale will MARKET CLOSE his short, causing a huge $1000+ price surge.

Then...

The massive whale will MARKET CLOSE his long, slowly, not to cause price to drop too fast and all is done.


He will make money 3 ways.

Funding rate at almost 1% (risk-free pretty much)
Huge gain on his massive short on Bitfinex
Huge gain on his massive long on Bitmex