Ethena arbitrage positions shrank by more than 60%, marking a rare balance between bulls and bears in the crypto derivatives market.

According to Mars Finance, since Bitcoin plummeted to $60,000 on February 8th, arbitrage positions in the decentralized stablecoin protocol Ethena have plunged from over $2 billion to below $800 million, a drop of over 60%. Ethena's business model relies on fulfilling the counterparty demand for leveraged long positions in the perpetual contract market. The significant contraction in positions indicates that short and hedgers are filling the role previously dominated by arbitrage traders. Analyst Soska Kyle points out that this shift is primarily due to large-scale hedging by crypto venture capital firms and small-to-medium-sized projects to protect their assets and lock in profits, resulting in short short positions in multiple related cryptocurrencies. Currently, the long-short positions in the derivatives market are approaching equilibrium, a state that is extremely rare historically and unsustainable, suggesting the market may be at a critical point of directional shift.