Bitcoin’s near-term price action is expected to benefit from renewed profitability among short-term holders, according to blockchain analytics firm Glassnode. Recent data reveals that the 7 day moving average of the short-term holder’s spent output profit ratio (SOPR) has surpassed 1, indicating that short-term holders are selling their coins at a profit. This development is seen as a bullish sign, demonstrating the capitulation of short-term holders and their confidence in the cryptocurrency’s upward trajectory, a reports Coindesk said.
Blockware Solutions analysts highlighted the significance of the short-term holder SOPR crossing above 1 in their weekly newsletter, stating that it signals positive near-term price action. The SOPR metric compares the recognised dollar value of spent outputs to the output creation value, reflecting the extent of profit for coins moved on-chain. Specifically focusing on wallets that have carried coins for shorter than 155 days, the short-term holder SOPR serves as an indicator for market sentiment among recent entrants, active traders, and weaker hands.
During bull markets, the short-term holder SOPR tends to remain above 1. This is because upward price trends enable short-term holders to sell their coins at prices higher than their acquisition cost. Moreover, the level around 1 often acts as a support group at the time of bull runs, as holders view it as an opportunity to buy more profitably, anticipating further price rallies. Conversely, during bearish periods, level 1 functions as resistance.
The SOPR previously crossed above 1 in January, indicating a shift towards a bullish trend, and has subsequently tested the support level on two occasions. BTC has experienced a remarkable 68% rally this year, displaying its resilience and potential for growth. At the time of reporting, the crypto was trading around $27,900, with a recent peak of $28,441 in overnight trading.
It’s worth noting that not only short-term holders but also long-term holders turned beneficial a month back, further reinforcing the positive outlook for Bitcoin. This convergence of profitability among both short-term and long-term holders suggests a potentially significant bullish period on the horizon.