Bitcoin's Short-Term Holders Are Again Selling at Profit

Short-term holders' renewed profitability is a positive signal for near-term price action, according to on observer.

AccessTimeIconMay 29, 2023 at 9:52 a.m. UTC

Bitcoin's (BTC) near-term outlook appears constructive as blockchain data show short-term holders of the cryptocurrency are moving coins at a profit.

The seven-day moving average of the short-term holder's (STH) spent output profit ratio (SOPR) has recently moved back above 1, according to blockchain analytics firm Glassnode.

"After a brief stint of coins moving at a loss, STH-SOPR is now back above 1," analysts at Blockware Solutions said in a weekly newsletter. "This is bullish for near-term price action as it shows capitulation from short-term holders."

The short-term holder SOPR of more than 1 means the average short-term holder in the market is selling coins at a profit. A reading below 1 is considered a sign of capitulation, while a reading of 1 indicates the average short-term holder is just breaking even.

The SOPR is calculated by dividing the realized dollar value of a spent output (UTXO) by the value at output creation to reflect the degree of realized profit for all coins moved on-chain. The short-term holder SOPR is focused on all wallets that have held onto their coins for less than 155 days.

The STH SOPR has historically stayed above 1 during bull markets. That's understandable, as rallies allow short-term holders – mostly new entrants, active traders or weak hands – to liquidate their holdings at a price higher than the acquisition cost.

Besides, the area around 1 tends to act as a support level during bull runs, as holders, expecting continued price rallies, see their cost basis as a profitable buying opportunity. On the flip side, level 1 acts as resistance during bearish trends.

The SOPR has moved above 1 (Glassnode)
The SOPR has moved above 1 (Glassnode)

The STH SOPR crossed above 1 in January, signaling a bullish trend reversal and has since tested the support twice. Bitcoin has rallied over 68% this year, according to CoinDesk data. At press time, the cryptocurrency was trading near $27,900, having put in a high of $28,441 during the overnight trade, CoinDesk data show.

Bitcoin's long-term holders also turned profitable a month ago, signaling a major bullish period ahead.

Edited by Sandali Handagama.


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Omkar Godbole

Omkar Godbole is a Co-Managing Editor on CoinDesk's Markets team.