One quantity has explained how Bitcoin could still have room to rise based on the trend formation in this popular on-chain indicator.
Bitcoin short-term holder SOPR may not have overheated yet
In a CryptoQuant Quicktake afteran analyst has the Spent Output Profit Ratio (SOPR) of Bitcoin’s short-term holders. The SOPR refers to an indicator that tells us whether the BTC investors are selling their coins at a profit or a loss.
This metric works by going through the transaction history of each token sold to check the price at which it was previously transferred. If this previous transaction value for a coin was lower than the current spot price at which it is now moving, selling it will contribute to the profit realization.
In the same way, the transactions of the coins of the opposite type lead to loss realization. The SOPR adds up these gains and losses for the entire network and calculates their ratio.
In the context of the current discussion, the Bitcoin SOPR of the entire user base is not of interest, but rather that of only a specific segment of it: the short-term holders (STHs). The STHs include the BTC investors who purchased their coins in the last 155 days.
This cohort represents the fickle side of the BTC sector, which tends to sell off easily when there is a notable change in the market, such as a price surge or crash.
Here is a chart showing the trend in the Bitcoin STH SOPR over the past few years:
The value of the metric appears to have been going up in recent days | Source: CryptoQuant
As seen in the chart above, the Bitcoin STH SOPR has remained above 1 for the past few months. In this zone, STHs’ profit-taking outweighs losses, so this cohort as a whole can be considered a net gain on its sales.
Recently, the indicator within this area has shown a sharp increase. The growth has coincided with the cryptocurrency’s rally to new all-time highs (ATHs), indicating that STHs have increasingly fallen prey to the profit-taking allure offered by the price rise.
Historically, taking profits from this cohort is something that has usually led to top values for the asset. However, as the quant highlighted in the chart, the current value of the STH SOPR is still significantly below the zone that has historically signaled market euphoria.
That said, while the danger of a cyclical top While the indicator may not be there at the moment, the indicator is nevertheless in a zone where local highs for Bitcoin have tended to be. For example, the peak in the first quarter of this year was also reached when the metric was in this region.
It now remains to be seen whether there is enough market demand to break this profit-taking wave from the STHs, or whether another top would follow for this asset.
BTC price
Bitcoin has fallen to a sideways move in recent days as the price is still trading around $90,400.
Looks like the price of the coin has shown stale action recently | Source: BTCUSDT on TradingView
Featured image from Dall-E, CryptoQuant.com, chart from TradingView.com