On-Chain Data Shows Bitcoin Short-Term Holder Profit Taking Increases, Will This Improve The Crypto’s Price?
Bitcoin short-term holder SOPR has recently increased
As pointed out by an analyst at CryptoQuant Post, examples of current trends have caused crypto prices to fall in the past. The relevant indicator here is the “Spend Output Profit Ratio” (SOPR), which tells us whether the average Bitcoin investor is currently selling his coins at a profit or at a loss.
When this metric has a value greater than 1, it means that holders are currently realizing some profits on their sales. On the other hand, values below the threshold suggest that the overall market is currently leaning towards loss-making. Naturally, the indicator being exactly equal to 1 means that the average holder is currently breaking even in their distribution.
One of the two main segments of the BTC market is made up of “short-term holders” (STHs), a group that includes all investors who received their coins within the last 155 days. Holders who have held onto their coins for more than this threshold amount are called “long-term holders” (LTHs).
Now, here is a chart that shows the trend in Bitcoin SOPR specifically for STHs:
The value of the metric seems to have risen in recent days | Source: CryptoQuant
As shown in the graph above, the Bitcoin STH SOPR (as well as its 7-day moving average) has recently risen and broken above 1. This means that BTC has rallied, STHs have taken profits and they are now selling to take these profits.
The chart also includes data for STH SOPR’s 7-day Triple Exponential Average (TRIX). TRIX is a momentum oscillator that shows the percentage change in a metric’s moving average after being exponentially smoothed three times (hence the name).
From the chart, it can be seen that during this bear market, whenever the STH SOPR 7-day TRIX has reached a positive top, the price of Bitcoin has also seen a local top formation and followed.
It appears that recently, the 7-day TRIX of STH SOPR has closed again, and the metric now appears to be rolling in, potentially moving towards a top formation.
This pattern appears to be consistent with earlier instances of bear markets, suggesting that this Bitcoin rally may be headed for the same fate as the previous ones. However that will only happen if the pattern completes and the indicator makes a top.
The analyst has also posted a chart of the 2018-2019 bear market, to see how the current rally compares to April 2019.
The trend in the STH SOPR 7-day TRIX in the 2018-2019 bear market | Source: CryptoQuant
Interestingly, the April 2019 rally only realized a short-term pullback from the first major spike in the indicator; It was only with the second spike that the price topped out. There are already some similarities between the current rally and that of April 2019, which could mean that the current one may also continue its momentum similar to the past rally by eliminating this first spike in the indicator.
At the time of writing, Bitcoin is trading at $22,900, up 5% over the past week.
BTC consolidates | Source: BTCUSD on TradingView
Featured image from Thought Catalog on Unsplash.com, Charts from TradingView.com, CryptoQuant.com