According to on-chain data, Bitcoin short-term investors have begun to suffer significant losses. This could be a bullish sign for Bitcoin.
Bitcoin Short-Term Owners are Taking Large Losses
According to a CryptoQuant analyst, there are now significant losses in the BTC market. This may remind you of the May 2021 market crash.
Here, the relevant indicator is the Spent output Profit Ratio. This is an on-chain measure. SOPR, which measures investors’ profit, is a measure of their overall profit ratio.
This indicator compares the sale price to each of the coins on the chain by looking at their purchase price.
If the SOPR value is greater than 1, that means the coins were sold for a profit during their period. Values below 1 indicate that holders sold at a loss.
Also, naturally, when the indicator’s value is exactly equal to one, the investors were, on average, breaking even for the specific timescale.
An alternative version to the metric is called the Short-Term Holder SOPR (STH–SOPR). This shows the SOPR of coins that have been held for less then 155 days.
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This chart shows the Bitcoin SOPR trend over the last few years.
Source: CryptoQuant| Source: CryptoQuant
The graph above shows that the STH–SOPR has fallen in value in recent years, so the metric now is below one.
As Bitcoin prices continue to drop, this means that short-term Bitcoin owners have begun to realise their losses.
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According to an analyst, this may look similar to what was seen after the May crash. So, it is possible that the coin will continue trading sideways, much like before, but then start to show some upward movement.
At the time of writing, Bitcoin’s price floats around $49k, down 0.5% in the last seven days. The crypto’s value has fallen 20% over the last 30 days.
The chart below shows how Bitcoin’s prices have changed over the course of the last five business days.
BTC price continues its downward trend over the past few days. Source: BTCUSD tradingview| Source: BTCUSD on TradingView
Bitcoin’s price has not shown any signs of improvement and is currently in consolidation. At the moment, it’s unclear when this sideways movement may end, but if the STH-SOPR is anything to go by, this trend may last a while longer, just like in May.
Unsplash.com featured image, Charts from TradingView.com and CryptoQuant.com charts