Long-term Bitcoin holders drive profit-taking, but funding rates signal market stability – Bitfinex

Bitcoin’s rally past the $100,000 threshold was short-lived as the leading cryptocurrency fell below the level barely 24 hours later. This 14% correction over the past week was driven by market participants, especially long-term holders (LTH), who took profits.

According to a Bitfinex Alpha report, on-chain metrics such as realized profits and perpetual futures funding rates indicate that the market is stabilizing and profit-taking has reduced.

BTC falls as LTHs take profits

Bitcoin’s correction last week resulted in liquidations of over $1.1 billion in long and short positions on major centralized exchanges. Bitfinex noted that the 10% drop occurred in eight minutes, representing the biggest correction in a window of less than an hour since March 2024 and the largest since the asset’s pre-election lows.

“This represents one of the largest liquidation cascades in USD notional terms since the November 2022 FTX collapse, and with half of these in Bitcoin positions, it also marked the second liquidation event largest long in USD notional terms for Bitcoin-related trading pairs.. As for Bitcoin itself, approximately 4,350 BTC were liquidated, marking the fourth liquidation. highest daily since 2019,” analysts explained.

While the medium-term outlook for bitcoin remains bullish, long-term holders have continued to sell their assets at a slower pace.

The sudden fall in the price of Bitcoin caused a slowdown in the distribution rate of LTH; therefore, the trajectory of the market is unknown. However, falling funding rates and low levels of realized profits suggest that stability is returning. These metrics provide insight into leveraged demand and selling pressure in the market.

BTC to find balance at the new level

Funding fees refer to the cost of keeping a perpetual futures contract open. This metric rose during bitcoin’s run to $100,000, but fell short of the levels recorded in March. With funding rates stabilizing, bitcoin’s medium-term volatility is more likely to be more contained because a more measured level of leverage is entering the market.

If funding rates drop further, it indicates that BTC traders are beginning to unwind excessive long leverage, possibly leading to a more balanced market. However, a rise in rates suggests that investors are adding risk to their long positions and that there is renewed speculative demand.

Meanwhile, the low levels of realized profits indicate that any additional selling by investors would be less dramatic, allowing the price of bitcoin to find a balance between supply and demand.

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