Bitcoin Traders Reduce Exposure Before Decline: CryptoQuant

Bitcoin's fall to $61,000 over the weekend was due to market participants reducing their exposure to the digital asset ahead of a planned halving on April 20, according to the latest CryptoQuant Weekly report.

Analysts say that traders have closed their long positions to take profits, and now, the volume of sell orders in the futures markets is buying buy orders. This is evident in the buy-to-let ratio, which is less than one. When buy orders control sell orders, the ratio is higher than one.

Traders reduce exposure to Bitcoin

As traders reduced their exposure to Bitcoin, total open interest decreased from 250,000 BTC to about 220,000 BTC. Short-term holders (those who have held BTC for less than six months) lifted their holdings to take huge profits from the asset's recent rally to $71,000.

Funding rates also performed well, turning negative for the first time since January 2024. According to CryptoQuant, negative liquidity indicates traders are willing to pay to open and maintain short positions.

Additionally, Bitcoin demand from whales (owners of 1,000 to 10,000 BTC) has slowed following the rapid surge seen last month. The month-on-month increase in the aggregate balance of these large entities slowed to 8% from 11% in mid-March.

At the same time, the growth of demand from permanent BTC holders (deposit addresses) and exchange-traded funds (ETFs) in the United States has weakened, the previous monthly records of 161,000 BTC are lower than the 204,000 BTC seen in previous months. ETFs have seen net outflows for three consecutive trading days, with outflows from grayscale GBTC outpacing the funds' total inflows.

Bitcoin is still in a bull market

Regardless of demand growth and open demand, BTC is still in a bull market phase. Analysts at CryptoQuant said the move, which required the latest selling price to reset traders' unrealized profits to zero, is considered a bottoming sign in bull cycles. It's close to the $58,000 dealer price that he's used as a support this season.

“From a long-term cycle perspective, Bitcoin is still in a bull market phase. CryptoQuant's Bull-Bear market cycle indicator is still in a BULL phase. But the bull market is overheated when the price rises above $70,000,” the firm said.