Bitcoin Short-Term Holder SOPR Is Currently Not In Distribution Zone

An analyst at CryptoQuant has discussed how one indicator may be able to provide hints about when it may be time to exit and enter Bitcoin.

In a recent Quicktake post, the analyst talked about distributing and accumulating BTC based on the behavior of the short-term holders. The short-term holders (STHs) are the investors who bought their coins within the past 155 days.

These holders make up for one of the two main sides of the Bitcoin market, with the other cohort being known as the long-term holders (LTHs). The STHs, in contrast to the HODLers, tend to be quickly responsive to market events, so their metrics easily display changes.

The indicator related to the STHs that the quant shared is the Spent Output Profit Ratio (SOPR). This metric tells us about whether the investors are selling their coins at a profit or loss.

The SOPR determines this by looking at the transaction history of each wallet taking part in a sell transaction to see what price it received its coins at. Transfers where this previous price is lower than the spot price are put in the profit sales, while those of the opposite type in the loss ones.

When the value of the indicator is greater than 1, it means the holders as a whole are realizing a net amount of profit. On the other hand, it being under the mark suggests the dominance of loss-taking.

Now, here is a chart that shows the trend in the Bitcoin SOPR specifically for the STHs over the last few years:

As is visible in the above graph, the analyst has highlighted two zones for the indicator. The lower zone, shaded in green, corresponds to a notable degree of loss taking from the STHs. According to the quant, it’s usually a good time to start accumulating Bitcoin whenever the STHs are displaying this behavior.

Similarly, the red zone, which corresponds to profit-taking from this cohort, could represent a distribution opportunity for the cryptocurrency. From the chart, it’s apparent that neither of these zones perfectly captures tops and bottoms in BTC’s price, so the analyst calls for only gradual selling and buying when the indicator enters the respective regions.

During the lows earlier in the year, the STH SOPR dipped into the green zone, implying this group was showing capitulation. With the recent price rally, the metric has recovered back above the 1 mark, but so far, it hasn't yet broken into the red area.

As such, at least going by this indicator, the time to start distributing Bitcoin may not be here yet.