The price of Bitcoin has shown signs of resilience and strength over this weekend after facing significant bearish pressure heading into it. On Friday, August 5, the flagship cryptocurrency suffered a mild correction following the release of weaker-than-expected employment data in the United States.
While the Bitcoin price has struggled to break out of its current choppy state, its sustained hold above the psychological $110,000 level displays the current resolution of investors. The latest on-chain data suggests that the market might have absorbed excess selling pressure and could be regaining momentum.
Is BTC Ready For A Sustained Move Higher?
In a September 6 post on the X platform, pseudonymous crypto analyst Frank revealed a shift in the activity of a key group of Bitcoin investors over the past few weeks. According to the market quant, BTC’s short-term holders (STH) (with coin holdings less than 155 days old) are beginning to lock in some of their profits.
This on-chain observation is based on the Short-Term Holder Spent Output Profit Ratio (STH-SOPR) metric, which assesses the profitability ratio of spent outputs (held for more than 1 hour but less than 155 days). This indicator provides insight into whether STHs are selling at a profit or at a loss.
When the Bitcoin STH-SOPR metric has a value greater than 1, it implies that the short-term investors are selling at a profit. On the other hand, an STH-SOPR value less than 1 suggests that the short-term holders are capitulating and selling at a loss.
Frank shared that the Bitcoin STH-SOPR metric has returned above the critical 1 threshold level for the first time in 20 days. This means that the short-term investors, who were busy selling at a loss the past three weeks, are now back realizing profits.
Typically, when the STH-SOPR metric is below 1, it means that weak hands are exiting the market, enabling the diamond hands (long-term investors) to accumulate. Meanwhile, a return above the 1 threshold could mark the end of that distribution period, with a recovery rally typically on the horizon.
However, the pertinent question remains whether the past 20 days were enough to shake out the weak hands for the next leg up. Frank noted that the market could want to inflict more pain on the short-term holder cohort before the next move higher. Hence, investors might want to exercise caution before making a decision, as the market seems to be at a critical juncture.
Bitcoin Price At A Glance
As of this writing, the price of BTC stands around $110,200, reflecting no significant movement in the past 24 hours. According to CoinGecko, the market leader is up by nearly 2% in the last seven days.
]]>The Bitcoin STH-SOPR (EMA-30) has now returned above a value of one for the first time in four months, a sign that could prove to be bullish for the price of the crypto.
Bitcoin Short-Term Holder SOPR Has Broken Above 1 Recently
As pointed out by an analyst in a CryptoQuant post, the BTC STH-SOPR is currently forming a pattern that has historically been bullish for the coin.
The “Spent Output Profit Ratio” (or the SOPR in short) is a Bitcoin indicator that tells us whether coins in the market are selling at a profit or at a loss right now.
The metric works by looking at the history of each coin being sold and checking whether the price it last moved at was less than the current one or more than it.
When the value of this indicator is above one, it means investors are, on average, selling their Bitcoin at a profit right now.
Related Reading | Possible Timelines For Bitcoin To Hit $100k: Why CEOs See Bullish Signs
On the other hand, SOPR values below one imply overall losses are being realized in the BTC market at the moment.
A modified version of this indicator takes into account only those investors who held their coins for less than 155 days before selling them. This group of investors is called the short-term holders (STH).
Now, here is a chart that shows the trend in the Bitcoin STH-SOPR (EMA-30) over the last few years:
Looks like the value of the metric has risen above one recently | Source: CryptoQuant
As you can see in the above graph, the Bitcoin STH-SOPR (EMA-30) seems to have followed a pattern over the last five years.
It looks like during bearish periods, the indicator has always had a value less than one. While bullish trends have occurred while the metric has had a value greater than one.
Recently, the STH-SOPR has broken above 1 once again after staying below the threshold for nearly four months since December of 2021.
Related Reading | Data Shows Bitcoin Investors Afraid To Take Risk As Leverage Remains Low
If the pattern from before holds true now as well, then this breakout may suggest that Bitcoin will rally towards at least a local top soon.
However, such an uptrend may not last too long. In the chart, there are two regions where the metric did break above 1 and the price rallied some, before continuing the bearish trend and the STH-SOPR returned to loss values.
BTC Price
At the time of writing, Bitcoin’s price floats around $46.1k, down 2% in the past week. The below chart shows the recent trend in the value of the coin.
BTC's price seems to have moved sideways over the last few days | Source: BTCUSD on TradingView
Featured image from Unsplash.com, charts from TradingView.com, CryptoQuant.com