Cryptocurrency exchange Bitfinex reported on Monday that long-term holders are taking profits as Bitcoin (BTC) surged, leading to the recent price correction. However, analysts believe that the selling pressure from long-term holders remains relatively manageable, and the market is expected to continue rising in the medium term. Bitfinex's report also mentioned that speculative funds are flowing into altcoins and cautioned about extreme funding rates.
Bitcoin price correction
According to a report from Bitfinex, the spot demand for Bitcoin remains strong, with net inflows into the U.S. Bitcoin spot exchange-traded fund (ETF) exceeding $3.35 billion in the past week. However, Bitfinex noted that because ETFs and other institutional entities typically do not execute buy orders over the weekend, combined with long-term holders continuing to sell, the market experienced profit-taking behavior over the weekend, leading to a drop in Bitcoin prices due to insufficient demand to match this supply.
Bitfinex stated that as Bitcoin approaches the $100,000 mark and maintains above $90,000, it is necessary to closely monitor daily ETF fund flow conditions. If inflows slow down, indicating reduced interest in spot Bitcoin at the current high prices, it may serve as a warning signal for a larger correction.
Bitfinex even anticipates a larger correction this week, especially in the context of key macro events such as the release of U.S. Consumer Price Index (CPI) data and the publication of Federal Open Market Committee (FOMC) meeting minutes. Nevertheless, analysts believe that 'any sell-off is a healthy correction.'
Long-term holders taking profits
The Bitfinex report pointed out that long-term holders are taking profits as Bitcoin surged, with over 461,000 Bitcoins spent (transferred out) since breaking the previous high of $73,666 last month, realizing gains far above their realization price of $24,912 (the average purchase price of long-term holders' wallets).
Source: Bitfinex
Bitfinex noted that while selling pressure from long-term holders has increased, compared to historical peaks in March 2021 and March 2024 (when long-term holder supply decreased by 2.5 million and 1.4 million BTC, respectively), the current selling pressure remains relatively manageable. Analysts then wrote:
These trends indicate a healthy and temporary momentum stagnation, with the broader market likely absorbing selling pressure and continuing to rise in the medium term.
Speculative funds flowing into altcoins
Bitfinex noted that the market capitalization of cryptocurrencies other than Bitcoin and Ethereum (referred to as Total3 index) has also reached a new cycle high, thanks to a sharp rebound in investor sentiment.
Source: Bitfinex
Currently, the market capitalization of altcoins is nearing the peak of $98.4 billion in May 2021, indicating that speculative funds are shifting from Bitcoin to altcoins. Analysts wrote:
Historically, this kind of rotation often signals the start of 'alt season,' characterized by altcoins outperforming Bitcoin.
Bitfinex stated that the annualized funding rates of large-cap altcoins are breaking through the 45% threshold, indicating a rise in speculative activity. With increased retail participation, volatility in lower time frames is expected to increase, further fueling the momentum of altcoins. However, analysts warned that this situation should be approached with caution, as extreme funding rates often precede sharp corrections.
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