Bitcoin Short-Term Holder SOPR May Provide Hints About When It May Be Time to Exit

An analyst at CryptoQuant has discussed how the Bitcoin short-term holder Spent Output Profit Ratio (SOPR) may provide hints about when it may be time to accumulate and distribute (exit) the cryptocurrency.

Short-Term Holders And Their Impact

In a recent Quicktake post, the analyst explained that there are two main sides to the Bitcoin market: the short-term holders (STHs) and the long-term holders (LTHs). The STHs are credited with holding BTC for 155 days or less, while the LTHs are those who purchased their coins over a year ago.

The STHs are usually more reactive to market events, which is why their indicators and metrics tend to change more rapidly.

One such indicator is the Spent Output Profit Ratio (SOPR), which 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. If the previous price is lower than the current spot price, then the transaction is classified as a profit sale. Transactions where this is not the case are considered to be loss-taking.

Whenever the value of the indicator is greater than 1, it means the holders as a whole are realizing a net amount of profit. Conversely, it being under the mark suggests the dominance of capital loss.

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

As is clear from 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 an opportunity to distribute the cryptocurrency.

It’s worth noting that neither of these zones perfectly capture tops and bottoms in BTC’s price, so the analyst recommends only performing 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.

BTC Price

Bitcoin has made recovery of more than 10% in the past week as its price has now crossed the $104,000 mark.

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