Amid Bitcoin’s ongoing upward momentum in price, a key on-chain Bitcoin metric has been observed that offers clues about the market’s next direction.
This notable indicator known as the Short-Term Holder Spent Output Profit Ratio (STH SOPR) which reveals the behavior of Short-Term Holders (STHs) has shown that STHs have started to sell at a loss.
This metric compares 30-day STH SOPR to its 365-day counterpart and provides insight into whether short-term investors are realizing profits or losses.
Bitcoin Short-Term Holders Realized Losses
To grasp what the Short-Term Holder’s current selling at a loss means for the market, it’s important to first understand its broader market implications. Darkfost, the CryptoQuant analyst behind the revelation of this data reveals that when STH SOPR turns negative, two scenarios often unfold “holding” and “capitulation”
The analyst mentioned that some STHs may hold their BTC, using their realized price as a potential support level, while others could capitulate, triggering further corrections. Historically, these periods of STH losses have marked attractive entry points for long-term investors.
BTC short-term holders start to sell at a loss
“Historically, when this metric turns negative, it often highlights attractive entry points for the long term.” – By @Darkfost_Coc
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https://t.co/A4jLhI7hMG pic.twitter.com/zeg31MtQqc
— CryptoQuant.com (@cryptoquant_com) January 21, 2025
However, he further emphasizes that confirming such signals requires examining additional metrics and assessing the overall market sentiment. In Darkfost words:
Historically, when this metric turns negative, it often highlights attractive entry points for the long term. However, it’s essential to confirm such signals by cross-referencing with other metrics and assessing the broader market sentiment.
MVRV Ratio Highlights Potential Market Trends
Besides the STH realized losses suggesting potential attractive entry points for long-term investors, Bitcoin’s Market Value to Realized Value (MVRV) ratio has also indicated an interesting trend incoming for Bitcoin.
Another CryptoQuant analyst known as Tugbachain recently shared in a post on the CryptoQuant QuickTake platform that currently, the MVRV ratio stands at 2.4, and it is approaching a key support level.
If it breaks below this support and then reverses its downtrend, it could climb back into the 4-6 range historically associated with Bitcoin peaks, the analyst reveals.
For context, the MVRV ratio is an indicator that measures whether a cryptocurrency is overvalued or undervalued by comparing its market capitalization to the value at which it was last moved.
According to Tugbachain, over multiple halving cycles, the MVRV ratio has proven to be a reliable tool for identifying market tops and bottoms, as well as shorter-term fluctuations adding credibility to the latest indication.
Featured image created with DALL-E, Chart from TradingView
