According to CryptoQuant's latest weekly report, Bitcoin's drop to $61,000 over the weekend was due to market participants reducing their exposure to the digital asset ahead of the halving scheduled for April 20.
According to analysts, traders have closed their long positions to take profits and now the volume of sell orders in the perpetual futures markets dominates buy orders. This is reflected in the buy/sell ratio, which has fallen below one. The ratio rises above one when buy orders outnumber sell orders.
Traders are reducing exposure to Bitcoin
As traders reduced their exposure to Bitcoin, the total open interest fell from 250,000 BTC to around 220,000 BTC. Short-term holders (companies that have held BTC for less than six months) have been dumping their assets to capture high profit margins from the asset's recent rally to $71,000.
Funding rates also took a hit as they turned negative for the first time since January 2024. According to CryptoQuant, negative funding rates indicate that traders are willing to pay to open and maintain short positions.
Additionally, the growth in Bitcoin demand from whales (holders with 1,000 to 10,000 BTC) has slowed after seeing a high pace last month. The monthly increase in the total balance of these large companies has fallen to 8% from 11% in mid-March.
Likewise, demand growth from permanent BTC holders (accumulation addresses) and exchange-traded funds (ETFs) in the United States has moderated, with the former recording monthly records of 161,000 BTC, compared to 204,000 BTC in previous months. ETFs recorded net outflows for three consecutive trading days, with outflows from Grayscale's GBTC exceeding the funds' cumulative inflows.
Bitcoin is still in a bull market
Despite the collapse in demand growth and open interest, BTC is still in the bull market phase. Analysts at CryptoQuant said the recent selloff was needed to reset traders' unrealized profits to zero, a move considered a bottom signal in bull cycles. The value of Bitcoin has also approached the $58,000 price realized by traders, which has served as support 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 that the bull market had entered an overheated phase as prices rose above $70,000,” the company said.
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