Bitcoin Long-term Holders Drive Profit-taking Spree, But Funding Rates Signal Market Stability: Bitfinex

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

According to a Bitfinex Alpha report, on-chain metrics like realized profit and perpetual futures funding rates signal that the market is stabilizing and profit-taking has eased off.

BTC Slumps as LTHs Take Profits

Bitcoin’s correction last week triggered over $1.1 billion in liquidations across long and short positions in major centralized exchanges. Bitfinex noted that 10% of the plunge occurred within eight minutes, representing the largest correction in a sub-one-hour window since March 2024 and the biggest 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 largest long liquidation event in USD-notional terms for Bitcoin-related trading pairs. In terms of Bitcoin itself, approximately 4,350 BTC were liquidated, marking the fourth highest daily liquidation since 2019,” analysts elaborated.

Although bitcoin’s medium-term outlook remains bullish, long-term holders have continued to sell their assets at a slower pace.

Bitcoin’s sudden price drop led to a slowdown in LTHs distribution rate; hence, the market trajectory is unknown. However, falling funding rates and low realized profit levels suggest stability is returning. These metrics offer insights into leveraged demand and sell-side pressure in the market.

BTC to Find Equilibrium at New Level

Funding rates refer to the cost of holding an open perpetual futures contract. This metric surged during bitcoin’s race to $100,000 but did not reach 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 decline further, it indicates that BTC traders are beginning to unwind excessive long leverage, possibly leading to a more balanced market. However, an increase in the rates suggests that investors are adding risk to their long positions and that there is renewed speculative demand.

Meanwhile, low realized profit levels indicate that any further sell-offs from investors would be less dramatic, and this will allow bitcoin’s price to find an equilibrium in supply and demand.