Bitcoin Traders Decrease Risks Before Halving: CryptoQuant

Bitcoin’s drop to $61,000 during the weekend was a result of traders reducing their exposure to the digital asset ahead of the halving scheduled for April 20, as per the latest CryptoQuant weekly report.

Analysts noted that traders closed their long positions to lock in profits, leading to a dominance of sell orders over buy orders in the perpetual futures markets. This shift is reflected in the Buy Sell Ratio, which has dropped below one. The ratio typically rises above one when buy orders surpass sell orders.

Traders Reduce Bitcoin Exposure

With traders decreasing their exposure to Bitcoin, the total open interest decreased from 250,000 BTC to around 220,000 BTC. Short-term holders (those holding BTC for less than six months) sold off their assets to capitalize on the asset’s recent surge to $71,000.

Funding rates also turned negative for the first time since January 2024, indicating that traders are willing to pay for opening and maintaining short positions.

Furthermore, the growth in Bitcoin demand from whales (holders with 1,000 to 10,000 BTC) has slowed down after a rapid increase seen last month. The month-on-month growth in the total balance of these large entities has reduced from 11% to 8% in mid-March.

Similarly, the demand growth from long-term BTC holders (accumulation addresses) and exchange-traded funds (ETFs) in the United States has weakened, with accumulation addresses recording monthly increases of 161,000 BTC, down from 204,000 BTC seen in previous months. ETFs have experienced net outflows for three consecutive trading days, with outflows from Grayscale’s GBTC exceeding the cumulative inflows of the funds.

Bitcoin Still in Bull Market Territory

Despite the decline in demand growth and open interest, BTC remains in a bull market phase. CryptoQuant analysts mentioned that the recent sell-off was necessary to reset traders’ unrealized profits to zero, which is considered a bottom signal in bull cycles. Bitcoin’s value has also approached the traders’ realized price of $58,000, which has acted as a support level during this period.

“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 indicated that the bull market had entered an overheated phase when prices surged above $70K,” the firm stated.


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