How come Bitfinex BTC lending rates are so low lately? Around 0.27% today and it's been like that for bit.
because short levels halved over the past few weeks. shorts started getting squeezed on the run to the $4200s and they've been closing ever since. less demand for shorts = lenders offering lower rates
Actually, interest rates just show interest in asset
As the name itself kinda suggests. Whether it is a positive interest or a negative one is another question as people don't necessarily borrow money to open shorts. They can just easily borrow to open longs.
He's right that less demand for borrowed BTC is causing lower rates. That's obvious since open interest has dropped by 20K BTC since the last peak. It's safe to say some of that (probably most, really) is BTC/USD short interest because BTC/USD eclipses all the ALT/BTC markets in volume and order book depth. You can only use margin on a limited number of alt markets too.
In fact, the highest rates in USD that I ever saw at Bitfinex were exactly when Bitcoin had been skyrocketing. It was obvious that people were buying bitcoins on margin to sell them later when the price rise gave them enough profits. As soon as Bitcoin started to go down, USD interest rates went down too
The cost of borrowing USD rises when people are bullish on BTC/USD because more people are opening longs. By the same token, the cost of borrowing BTC falls when people are bullish on BTC/USD because less people are opening shorts. These are two sides of the same coin.
Nothing bodes well for price presently, and interest rates should be your least concern
I guess you don't use sentiment as an indicator? I always look at longs vs. shorts and open interest to gauge the commitments of traders. When most traders are piled on one side of the market, they're usually wrong.
