The pattern of an on-chain metric could indicate that Bitcoin could see more downsides before finding a recovery.
Bitcoin STH SOPR has not reached the lower zone yet
An analyst in a CryptoQuant Quicktake after explained that BTC’s short-term holders are selling at a loss. The relevant indicator here is the ‘Spent Output Profit Ratio (SOPR)’, which tells us whether the Bitcoin holders are selling their coins at a profit or a loss.
When the value of this indicator is greater than 1, it means that the average holder in the market is moving their coins with a profit. On the other hand, values below this threshold imply that loss taking is the dominant force in the sector.
Obviously, if the SOPR is exactly equal to one, this indicates that the market is currently just breaking even with the sale, as the total amount of realized gains cancels out the losses.
The SOPR can also be defined for only part of the market. In the context of the current discussion, the group of short-term holders (STH) is interesting. These investors have been holding their coins since less than 155 days ago.
Here is a chart showing the trend in the 30-day moving average (MA) Bitcoin SOPR over the past few years:
Looks like the 30-day MA value of the metric has been going down in recent days | Source: CryptoQuant
As shown in the chart above, the 30-day MA Bitcoin STH SOPR has been above 1 for most of 2023, but after the recent battle in the asset’s price, the indicator has dropped below this level.
Historically, the only indicator level has been a support line for the cryptocurrency as it has seen many rebounds. For example, Bitcoin bottomed out on this point during the slumps in both March and June.
However, with the recent pullback, this support level has been breached as the STHs are now selling their coins at a loss. Typically, when the metric drops below this level, it will not rebound above this level any time soon, as the line begins to act as resistance instead.
The Bitcoin STH SOPR has historically been able to find rebounds in the green box that the quant has marked on the chart. The indicator is still at a considerable distance above this bottom zone.
If the BTC price will not recover until the indicator falls within this zone, further declines may lie ahead for the asset, forcing the STHs to capitulate to a deeper degree.
BTC price in the short term
Bitcoin has continued its side battle of late as the cryptocurrency has been unable to find a breakthrough in either direction. The price of the asset is hovering around $25,700.
BTC continues to show stagnation | Source: BTCUSD on TradingView
Featured image by Maxim Hopman on Unsplash.com, charts from TradingView.com, CryptoQuant.com