Bitcoin’s short-term holders have once again started selling their coins at a profit, providing a positive signal for the cryptocurrency’s near-term price action. This recent development has caught the attention of observers, who believe that it reflects a constructive outlook for Bitcoin (BTC) in the coming days.
Blockchain data reveals that the seven-day moving average of the short-term holder’s (STH) spent output profit ratio (SOPR) has risen above 1, as reported by Glassnode, a leading blockchain analytics firm. In their weekly newsletter, analysts at Blockware Solutions highlighted this bullish trend, stating, “After a brief period of coins moving at a loss, STH-SOPR is now back above 1, showing capitulation from short-term holders.”
When the short-term holder SOPR exceeds 1, it indicates that, on average, short-term holders are selling their coins at a profit. Conversely, a reading below 1 suggests capitulation, while a reading of 1 implies that short-term holders are merely breaking even.
To calculate the SOPR, the realized dollar value of a spent output (UTXO) is divided by its value at the time of output creation, thereby reflecting the degree of realized profit for all coins moved on-chain. The short-term holder SOPR focuses on wallets that have held onto their coins for less than 155 days.
Historically, during bull markets, the STH SOPR has remained above 1. This can be attributed to the fact that rallies enable short-term holders, who are typically new participants, active traders, or weak hands, to sell their holdings at prices higher than their acquisition costs.
Moreover, the vicinity of the SOPR around 1 tends to act as a support level during bull runs. Holders, expecting continued price surges, view this level as a profitable opportunity to buy. Conversely, during bearish trends, level 1 serves as resistance.
In January, the STH SOPR crossed above 1, signaling a reversal in the bullish trend, and it has since tested the support level twice. Bitcoin’s price has surged by over 68% this year, as per CoinDesk data. At present, the cryptocurrency is trading near $27,900, with a recent peak of $28,441 during overnight trading.
Additionally, Bitcoin’s long-term holders turned profitable approximately a month ago, which further indicates a significant bullish period on the horizon.
In conclusion, the renewed profitability of Bitcoin’s short-term holders is an optimistic sign for the cryptocurrency’s near-term price action. The increase in the short-term holder SOPR suggests a favorable outlook as it signifies capitulation from these holders. This development, coupled with the positive performance of Bitcoin’s long-term holders, sets the stage for a potentially bullish period in the market. As Bitcoin continues to make waves in the financial landscape, investors and enthusiasts eagerly await further developments that could shape its future trajectory.
