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- Short-term Bitcoin holders are making the highest gains since August after BTC broke above $63,000.
- Widespread profitability has shifted market sentiment to positive, which could spark a prolonged rally.
Bitcoin [BTC] was trading at $63,790 at the time of writing, its highest price this month. Positive macro factors have caused BTC to defy the typical September decline, and with “ToIn sight, bulls appear to be making their move.
However, as this month’s positive macro stories appear to have run out, traders who have held Bitcoin for less than 155 days hold the key to the next near-term price moves.
Increase in profits of Bitcoin holders in the short term
Data from CryptoQuant showed that after Bitcoin broke $60,000 earlier this week, short-term holders made profits. This cohort was previously underwater.
The shift in profitability can be seen in the short-term output profit ratio (SOPR), which has risen sharply from below 1 to the highest level since late August.
Source: CryptoQuant
This measure indicated a shift in market sentiment from negative to positive. The Bitcoin fear and greed index confirmed this when it rose to 54, the highest level in more than three weeks.
The short-term profitability of the holders is also reflected in the realized price – UTXO age categories. Traders who have held BTC for one to three months have been below their average purchase price since August.
These traders returned to profitability on September 18, after BTC rose above $61,800.
Source: CryptoQuant
According to CryptoQuant analyst Avocado_onchainthe average purchase price of short-term holdings acts as a strong resistance level. With Bitcoin breaking above, it indicates a strong bullish trend.
Risk of profit taking
The widespread profitability among Bitcoin holders in the short term shows bullish sentiment, but also poses a risk to the short-term rally if they decide to sell.
The coins distributed by these holders have reached a weekly high, as evidenced by the Exchange Inflow – Spent Output Value Bands, which coincided with the price increase.
Source: CryptoQuant
This suggests that short-term holders could take profits after realizing gains.
However, as selling activity has not dampened the rally, a large number of short-term traders selling at a profit could pique the interest of new buyers.
Traders should also beware of the $64,000-$70,000 levels as 4.5 million Bitcoin addresses purchased at these prices are still underwater according to IntoTheBlock data.
Read Bitcoin’s [BTC] Price forecast 2024–2025
As such, Bitcoin will encounter resistance as it approaches this zone.
Nevertheless, whales are yet to interact with BTC, amid the recent gains. Net flow from large farmers has been mostly flat over the past two days, after a period of accumulation. This reduces the risk of a major sell-off.
Source: IntoTheBlock