Bitcoin Long-Term Holders Drive Profits, But Funding Rates Signal Market Stability: Bitfinex

Bitcoin's rally past the $100,000 threshold was short-lived, as the leading cryptocurrency fell below that level 24 hours later. This 14% correction in the last week was driven by profit taking by market participants, especially long-term holders (LTHs).

According to the Bitfinex Alpha report, on-chain metrics such as guaranteed profits and ongoing future funding rates indicate that the market is stabilizing and profitability has decreased.

When LTHs gain, BTC falls

Bitcoin's correction last week triggered more than $1.1 billion in long and short positions across major centralized exchanges. Bitfinex said it represented the largest correction in a sub-one-hour window since March 2024 and that 10% of the asset's pre-selection low occurred in eight minutes.

“This represents one of the largest liquidation cascades in USD-notional terms since the November 2022 FTX crash, and half of that in Bitcoin positions, as well as the second-largest long liquidation event for Bitcoin-related trading pairs in USD-notional terms. The fourth-highest daily liquidity since 2019.” By marking, approximately 4,350 BTC were liquidated,” the analysts explained.

Although the medium-term outlook for Bitcoin remains bearish, long-term holders continue to sell their holdings slowly.

Bitcoin's sudden price drop has slowed down the circulation of LTHs. So the market situation is unknown. However, falling financing rates and lower realized profit levels indicate that stability is returning. These metrics provide insights into demand and sell-side pressure in the market.

BTC to find balance at a new level

Funding rates indicate the cost of holding an open perpetual futures contract. This benchmark rose to $100,000 during Bitcoin's rally but failed to reach the levels recorded in March. With funding rates stabilizing, bitcoin's medium-term volatility is likely to be more subdued as a more measured level of consumption enters the market.

If financial rates are decreasing further, it suggests that BTC traders are beginning to unwind their excessive long leverage, possibly leading to a more balanced market. However, the rise in prices indicates that investors are increasingly risking their long positions and that there is renewed speculative interest.

Meanwhile, the low realized profit levels indicate that any additional selling from investors will be dramatic, and this will allow the price of bitcoin to find a balance between supply and demand.