Bitcoin Approaches $109k: Short-Term Holder Sentiment Shifts

As Bitcoin approaches its all-time high of $109k, market excitement is beginning to resurface. A key tool to track this shift in sentiment is the Short-Term Holder (STH) Supply in Profit/Loss Ratio

As Bitcoin (BTC) approaches its all-time high of $109k, set in November 2022, signs of market excitement are beginning to emerge once again.

A useful tool to track this shift in sentiment is the Short-Term Holder (STH) Supply in Profit/Loss Ratio, which helps gauge the mood of active investors, typically those who hold coins for several months or less.

This metric proved especially insightful during the correction on April 7, when it dropped to 0.03, signaling that nearly all STH-held supply was underwater. This new low was recorded as BTC hit its $76k price floor.

Since then, the ratio has surged to 8.69 on July 17, indicating that more than 90% of STH supply is now back in profit.

This reading is significantly above the equilibrium level of 1.0, suggesting that the bullish momentum is likely to continue as long as the STH Supply in Profit/Loss Ratio stays well above this threshold.

However, any prolonged drop below this point could indicate a shift in market strength and suggest the potential for trend exhaustion.

At present, the STH Supply in Profit/Loss Ratio is showing no signs of decreasing and has actually been steadily increasing since April 2023.

This signals that the market strength remains intact, and there is no immediate threat of a strong correction or trend exhaustion.

The STH Realized Profit has also seen a recent surge and is now almost +3 standard deviations above its 90-day average.

This reflects a notable increase in profit realization among short-term holders.

Historically, during previous rallies towards Bitcoin’s all-time high, this metric has reached over +5 standard deviations, indicating that much stronger profit-taking pressure is often necessary to counteract the inflow of fresh demand.

However, STH Realized Profit has yet to reach such extremes, suggesting that while profit-taking is certainly present and has seen a recent uptick, it is not yet exerting overwhelming pressure on the market.

Overall, while short-term holders are sitting on significant unrealized gains, which could lead to increased profit-taking, the STH Realized Profit metric does not yet indicate an impending threat of demand exhaustion, especially not near a potential local top.

To conclude, despite a recent surge in profit-taking, signaled by the STH Realized Profit, this pressure is not yet strong enough to overcome the bullish momentum, which is evident in the high STH Supply in Profit/Loss Ratio.

This suggests that the market is likely to continue trending upwards, especially if we consider the strong institutional demand highlighted by the large spot Bitcoin flows.