Since the beginning of 2015, the XBT/USD spot rate and total long leverage outstanding at Bitfinex (the world’s most liquid XBT/USD exchange) have moved in close parallel. For the first time this year, the two trends have diverged dramatically.

Leverage has played an increasingly important role in the digital currency markets over the past year, driving much of the total liquidity. As shown in the chart below, roughly 70% of total XBT/USD on-exchange liquidity is at venues that offer leverage.

Leveraged Longs

The charts below shows the close relationship between the gross long leverage on Bitfinex relative to TradeBlock’s XBX index. This indicates price runs may have been driven by leveraged buying, but has also historically caused dramatic events when market downturns lead to automated margin calls on those positions.

Over the last week or so, that multi-month trend has diverged dramatically as XBT/USD fell roughly 17% while total leverage has climbed 15%, adding an additional $3M.

Leveraged Shorts

To some extent the latest price drop may have been tempered as traders closed out short positions, adding a bid in the market worth nearly 15% of total outstanding XBT swaps. That said, that figure has begun to climb again over the past few hours, as shown below.

TradeBlock Professional clients can view detailed swap data and statistics here.