A CryptoQuant author has discussed how the Bitcoin short-term holder SOPR may provide hints about when it may be time to exit.
Bitcoin Short-Term Holder SOPR Is Currently Not In Distribution Zone
In a CryptoQuant Quicktake post, an analyst has talked about when to distribute and accumulate Bitcoin based on the behavior of the short-term holders. The short-term holders (STHs) refer to the BTC investors who purchased their coins within the past 155 days.
These holders make up for one of the two main sides of the BTC market, with the other cohort being known as the long-term holders (LTHs). The STHs, unlike the HODLers, tend to be reactive to market events, so their metrics easily register changes.
The indicator related to the STHs that the quant has shared is the Spent Output Profit Ratio (SOPR). This metric basically tells us about whether the investors are selling their coins at a profit or loss.
The SOPR determines this by looking at the transaction history of each wallet taking part in a sell transaction to see what price it received its coins at. Transfers where this previous price is lower than the spot price are put in the profit sales, while those of the opposite type in the loss ones.
When the value of the indicator is greater than 1, it means the holders as a whole are realizing a net amount of profit. On the other hand, it being under the mark suggests the dominance of loss-taking.
Now, here is a chart that shows the trend in the Bitcoin SOPR specifically for the STHs over the last few years:
The value of the indicator seems to have been above the 1 level in recent weeks | Source: CryptoQuant
As is visible in the above graph, the analyst has highlighted two zones for the indicator. The lower zone, shaded in green, corresponds to a notable degree of loss taking from the STHs. According to the quant, it’s usually a good time to start accumulating Bitcoin whenever the STHs are displaying this behavior.
Similarly, the red zone, which corresponds to profit-taking from this cohort, could represent a distribution opportunity for the cryptocurrency. From the chart, it’s apparent that neither of these zones perfectly captures tops and bottoms in BTC’s price, so the analyst calls for only gradual selling and buying when the indicator enters the respective regions.
During the lows earlier in the year, the STH SOPR dipped into the green zone, implying this group was showing capitulation. With the recent price rally, the metric has recovered back above the 1 mark, but so far, it hasn’t yet broken into the red area.
As such, at least going by this indicator, the time to start distributing Bitcoin may not be here yet.
BTC Price
Bitcoin has made recovery of more than 10% in the past week as its price has now crossed the $104,000 mark.
The trend in the BTC price over the last five days | Source: BTCUSDT on TradingView
Featured image from Dall-E, CryptoQuant.com, chart from TradingView.com
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