Bitcoin’s fall to $61,000 over the weekend was a result of market participants reducing their exposure to the digital asset ahead of the halving slated for April 20, according to the latest CryptoQuant weekly report.
Analysts said traders closed their long positions to take profits, and now, the volume of sell orders in the perpetual futures markets is dominating buy orders. This is evident in the Buy Sell Ratio, which has declined below one. The ratio rallies above one when buy orders dominate sell orders.
As traders decreased their exposure to Bitcoin, total open interest fell from 250,000 BTC to approximately 220,000 BTC. Short-term holders (entities holding BTC for less than six months) offloaded their assets to realize high-profit margins from the asset’s recent rally to $71,000.
Funding rates also took a hit, as they have become negative for the first time since January 2024. CryptoQuant said negative funding rates indicate traders are willing to pay for opening and maintaining short positions.
In addition, Bitcoin demand growth from whales (holders with 1,000 to 10,000 BTC) has slowed down following a fast pace seen last month. The month-on-month increase in the total balance of these large entities has reduced to 8% from the 11% recorded in mid-March.
Similarly, the demand growth from permanent BTC holders (accumulation addresses) and exchange-traded funds (ETFs) in the United States has weakened, with the former seeing monthly records of 161,000 BTC, down from the 204,000 BTC seen in previous months. ETFs have witnessed net outflows for three consecutive trading days, with outflows from Grayscale’s GBTC surpassing the cumulative inflows of the funds.
Regardless of the plunge in demand growth and open interest, BTC is still in the bull market phase. CryptoQuant analysts said the recent sell-off was needed to reset traders’ unrealized profits to zero, a move deemed a bottom signal in bull cycles. Bitcoin’s value has also moved closer to the traders’ realized price of $58,000, which has served as support in this season.
“From a long-term cyclical perspective, Bitcoin is still in a bull market phase. CryptoQuant’s Bull-Bear Market Cycle Indicator is still in the BULL phase. However, it signaled the bull market had entered an overheated phase when prices increased above $70K,” the firm said.