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- Recent blockchain data signals a positive outlook for Bitcoin’s (BTC) near-term price, as short-term holders are selling their coins at a profit.
- The seven-day moving average of the Short-Term Holder’s (STH) Spent Output Profit Ratio (SOPR) has climbed back above 1, an indicator that is historically associated with bullish market periods.
Recent data suggests a promising near-term forecast for Bitcoin (BTC), as short-term owners of the cryptocurrency are transferring coins with profitable returns. The seven-day moving average of the Short-Term Holder’s (STH) Spent Output Profit Ratio (SOPR) has recently risen back above 1, according to analytics from blockchain firm Glassnode.
Indicator of Market Trend
Blockware Solutions analysts, in their weekly newsletter, highlighted the significance of this data,
“After a short period of coins moving at a loss, STH-SOPR is now back above 1. This is a bullish sign for near-term price action as it demonstrates short-term holders’ capitulation.”
In simpler terms, a STH SOPR above 1 implies that the average short-term market participant is selling their coins at a profit. A reading below 1 is seen as a sign of surrender, whereas a reading of 1 indicates the average short-term holder is merely breaking even.
The SOPR is derived by dividing the realized dollar value of a spent output (UTXO) by its value at output creation, effectively reflecting the degree of realized profit for all coins moved on-chain. The STH SOPR focuses on all wallets that have retained their coins for less than 155 days.
Historically, the STH SOPR tends to stay above 1 during bull markets, as rallies enable short-term holders—primarily new entrants, active traders, or weak hands—to liquidate their holdings at a price higher than their acquisition cost.
Bitcoin’s Performance and Long-Term Holder’s Profitability
In addition, during bull markets, the area around 1 tends to serve as a support level, as holders anticipate continued price rallies and view their cost basis as a profitable buying opportunity. Conversely, during bearish trends, the level 1 serves as resistance.
In January, the STH SOPR moved above 1, signalling a bullish trend reversal and has since tested the support twice. So far this year, Bitcoin has rallied by over 68%, as per CoinDesk data. As of press time, the cryptocurrency was trading close to $27,900, having achieved a high of $28,441 during overnight trading.
About a month ago, Bitcoin’s long-term holders also began to turn a profit, signalling a major bullish period ahead. The recent rise of Bitcoin, coupled with the profitability of short-term holders, suggests a promising future for the cryptocurrency, providing positive signals for the near-term price action.