Bitcoin Still Has Room To Rise, Quant Explains Why

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As a seasoned analyst with years of experience in the cryptocurrency market, I find the recent trend in the Bitcoin Short-Term Holder SOPR quite intriguing. The Spent Output Profit Ratio is an indicator that has proven its worth time and again in predicting market trends, and its current state suggests that profit-taking could still be a driving force behind Bitcoin’s price action.

An analyst has shared insights suggesting that Bitcoin might continue to increase, given the pattern emerging in a widely used network-based metric.

Bitcoin Short-Term Holder SOPR May Not Be Overheated Yet

In a CryptoQuant Quicktake post, an analyst has discussed the Spent Output Profit Ratio (SOPR) of the Bitcoin short-term holders. The SOPR refers to an indicator that tells us whether the BTC investors are selling their coins at a profit or loss.

To determine profits, this measurement method examines the past transaction records of each token that is currently being sold. If the price at which a particular coin was previously traded is lower than the current market price it’s being sold for now, then this transaction is considered as contributing to realizing profits.

In a similar fashion, trading coins of the opposite type results in actualized losses. The Spent Output Profit Ratio (SOPR) accumulates these gains and losses across the entire network, then determines their proportion.

In our ongoing conversation, we’re focusing on the Spent Output Profit Ratio (SOPR) for a particular Bitcoin user group, rather than the overall community – specifically, the short-term holders (STHs). These STHs are defined as individuals who purchased their Bitcoins within the last 155 days.

This group is characterized by those in the Bitcoin community who are prone to impulsive decisions, often selling their holdings when there’s a significant shift in the market, such as during a price surge or decline.

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

Over the past several months, the Bitcoin STH SOPR (Spend Output Profit Ratio) has consistently been above 1 on the graph you see. This indicates that the selling of STHs (Self-custodial Holders) is more about realizing profits than losses. Consequently, this group as a whole might be seen as making a net profit from their sales.

Lately, we’ve noticed a significant increase in this area for the indicator. This growth has occurred concurrently with the cryptocurrency reaching new record peaks (ATHS). This could imply that more and more Small Time Holders (STHs) are being drawn towards profit-taking due to the attractive opportunity presented by the price uptrend.

Historically, selling profits from this group often signals a peak for the asset. However, as the analyst’s chart shows, the present STH SOPR value remains well below the historical range that typically indicates market excitement.

As an analyst, I’ve noticed that the current position of this particular indicator tends to align with areas where local peaks for Bitcoin have historically occurred. For example, the peak we saw in the first quarter of this year also happened when the metric was in a similar range. While it doesn’t necessarily mean a cyclical top is imminent at this moment, it’s a pattern worth keeping an eye on.

It’s yet uncertain whether the current market demand is sufficient to exhaust this profit-taking trend by STHs, or if another peak will occur for the asset.

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Over the past few days, Bitcoin’s momentum has slowed down, moving laterally rather than increasing or decreasing significantly, with its value hovering approximately at $90,400.

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2024-11-19 13:11