On-chain data shows Bitcoin short-term holder profit-taking has spiked, will this lead to a correction in crypto prices?
Bitcoin Short-Term Holder SOPR Has Surged Recently
As the analyst pointed out in the CryptoQuant post, the occurrence of the current trend has led to a decline in the price of crypto in the past. The relevant indicator here is the “Spent Output Profit Ratio” (SOPR), which tells whether the average Bitcoin investor is selling the coins at a profit or a loss today.
When the value of this metric is greater than 1, it means that all holders realize some profit from selling now. On the other hand, values below the threshold indicate that the overall market is leaning towards the realization of current losses. Of course, an indicator equal to exactly 1 indicates that the current average holder is broken in the current distribution.
One of the two main segments of the BTC market is made up of “short-term holders” (STHs), which is a group that includes all investors who acquired the coin in the last 155 days. Holders who have been sitting on coins for more than the threshold amount are called “long-term holders” (LTH).
Now, here is a chart showing the trend in Bitcoin SOPR specifically for STH:
The value of the metric seems to have risen in recent days | Source: CryptoQuant
As shown in the chart above, Bitcoin STH SOPR (also the 7-day moving average) has surged and broken above 1 recently. This means that as the BTC rally has taken place, STH has made a profit and is now selling to reap the profit.
The chart also includes data for the three-day exponential average (TRIX) of the STH SOPR. TRIX is a momentum oscillator that shows the percentage change in a metric moving average after smoothing exponentially three times (hence the name).
From the chart, it can be seen that in this bear market, when the STH SOPR 7-day TRIX has reached a positive top, the price of Bitcoin has noticed a local top formation as well and then went down.
It looks like the latest, 7-day TRIX from STH SOPR has risen again, and the metric seems to be bending inward now, potentially moving into the top formation.
This pattern appears to be similar to what happened earlier in the bear market, which could suggest that this Bitcoin rally could be headed for the same fate as the previous one. Although it is only if the pattern is completed and the indicator makes the top.
Analysts have also posted a chart for 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 felt a short-term reversal of the first big spike in the indicator; it is only with the second spike that the top price comes out. There are some similarities between the current rally and the one in April 2019 already, which may mean that the current one can also reject this first spike in the indicator and continue the momentum, like the past rally.
BTC price
At the time of writing, Bitcoin is trading around $22,900, up 5% over the past week.
BTC consolidates | Source: BTCUSD on TradingView
Featured images from Thought Catalog on Unsplash.com, charts from TradingView.com, CryptoQuant.com