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” report.
The correction wiped out over $1.1 billion across centralized exchanges, with $815 million involving long positions, including $419 million directly tied to Bitcoin. That marks one of the largest liquidation cascades in dollar terms since the FTX collapse in November 2022 and the second-largest event for Bitcoin-related trading pairs.
Approximately 4,350 BTC were liquidated in a single day, the fourth-highest daily figure since 2019. Bitfinex attributes this liquidation cascade to profit-taking by long-term holders (LTHs), which led to a deceleration in their distribution rate following the sudden price drop.
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. This figure has since dropped to $2.5 billion per day, a 76% decline.
The sharp reduction in RP indicates that profit-taking has significantly eased, reducing sell-side pressure and enabling Bitcoin to stabilize at its new all-time high.
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
Futures funding rates, which surged during the rally, are also beginning to stabilize. On Dec. 5, the day Bitcoin reached its most recent price peak, funding rates on Bitcoin and Ethereum (ETH) momentarily exceeded 80-100% annual percentage rate (APR), signaling a significant level of leveraged long positions.
Smaller altcoins, like Dogecoin (DOGE) and Pepe (PEPE), saw even higher funding rates, exceeding 200% APR.
However, following the recent correction, funding rates have normalized to under 30% APR for altcoins and under 15% for Bitcoin and Ethereum. This decline signals a reduction in excessive leverage and suggests that the market is transitioning toward greater stability.
Moreover, Bitfinex anticipates that the $100,000 level will no longer be a significant support or resistance level as the market finds a new equilibrium.
The report emphasizes that a further decline in funding rates would signal continued unwinding of leveraged positions, paving the way for a more balanced market. Conversely, any re-acceleration in funding rates could indicate renewed speculative demand, potentially reigniting upward momentum.
As sell-side pressure eases and speculative demand stabilizes, Bitfinex maintains an optimistic mid-term outlook for Bitcoin. The coming weeks will determine whether Bitcoin’s consolidation above $100,000 can provide a stable foundation for further growth.
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