Bitcoin’s (BTC) 14% weekly correction after surpassing the $100,000 threshold does not invalidate its potential for further upside as key price metrics cooled down, according to the latest edition of the “Bitfinex Alpha” Reportage.
Over $1.1 billion was lost across all centralized exchanges. Of that, $815 million involved long positions. $419 million of those were directly linked to Bitcoin. It is one of the most significant liquidations in dollar terms, since the FTX failure in November 20,22.
A total of 4,350 BTC have been liquidated within a day. This is the highest figure for a daily since 2019. Bitfinex attributes the liquidation to long-term investors (LTHs) who took profits after a sudden drop in price.
Realized Profit (RP), a key metric tracking dollar gains from moved coins, peaked at $10.5 billion daily during Bitcoin’s surge to $100,000. The figure is now $2.5 billion, which represents a 76% decrease.
Bitcoin’s new high was achieved due to the sharp drop in RP. This indicates that sell-side pressure has been reduced and profit-taking is no longer as intense.
Bitfinex notes that this cooling-off period could allow Bitcoin’s price to establish a new equilibrium, with less abrupt sell-offs anticipated in the near term.
Stabilizing funding rates
The futures funding rate, which soared in the recent rally, is also starting to stabilise. Funding rates for Bitcoin (BTC) and Ethereum (ETH), the two currencies that reached their most recent peak on Dec. 5, briefly exceeded an annual percentage rate of 80-100%. This was a sign that leveraged positions were significant.
Funding rates for smaller altcoins such as Dogecoin, Pepe, and Pepecoin, which are all below 200% APR, were even higher.
After the recent correction in funding rates, they have now normalized below 30% for altcoins, and less than 15% for Bitcoin and Ethereum. The decline in funding rates indicates a decrease in excess leverage, and that the markets are moving towards greater stability.
Bitfinex predicts, meanwhile, that $100,000 will not be an important support or resistance as the market finds its new equilibrium.
According to the report, further reductions in funding rate would indicate a continuation of unwinding leveraged positions. This could pave way for an improved market. A reacceleration of funding rates, on the other hand, could signal renewed speculative interest, which would potentially spark upward momentum.
Bitfinex continues to maintain an optimistic outlook on Bitcoin’s mid-term future as the pressure from sellers eases. The coming weeks will determine whether Bitcoin’s consolidation above $100,000 can provide a stable foundation for further growth.
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