On-chain data could suggest that short-term Bitcoin holders may be behind the recent correction in the price of the cryptocurrency.
Bitcoin Short-Term Holders Behind The Correction?
As noted in a CryptoQuant post, on-chain data could suggest that sales from short-term holders could be the driver of the recent correction.
The relevant indicator here is the spent output profit ratio (SOPR for short). This metric shows the total amount of profit or loss that investors will make over a given period of time.
If the value of this indicator is above one, it means that the holders are selling their coins for a profit on average. While values below one suggest sellers are dumping their Bitcoin at a loss. SOPR values of exactly one mean that the overall market is currently balanced.
In order to check whether or not short term holders are taking profit, the indicator is modified to take into account the age of the coins.
The short-term offer consists of all bitcoins that last moved less than 155 days ago (but more than an hour ago). These coins are usually owned by traders who intensely shift their positions with every move in order to maximize their profits.
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The SOPR for such investors is called STH-SOPR (STH stands for Short-Term Holder). The following graph shows the performance of this indicator over the past few months.
BTC’s short-term SOPR compared to price trend | Source: CryptoQuant
As the graph above shows, the value of the STH-SOPR also increased significantly when Bitcoin hit its new ATH at around $ 67,000.
This implies that these short-term investors took the opportunity of BTC’s great rise to realize some of their profits. And since the correction timing follows shortly thereafter, it is possible that this sale by these investors was the cause of the slump.
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At the time of writing, Bitcoin’s price is hovering around $ 63,000, up 1% over the past seven days. In the past month, crypto has accumulated 49% in profits.
Here is a graph showing the coin’s performance over the past five days:
The price of BTC appears to be recovering from the correction | Source: BTCUSD on TradingView
A few days ago, Bitcoin successfully hit a new all-time high (ATH) of around $ 67,000, but it didn’t take long for the price of cryptos to correct.
It is possible that this dip was caused by short-term holders, as the previous chart suggests. Long-term owners who stay upbeat can bring BTC to even higher ATHs. And if you look at the price chart, it may seem that the recovery has already started.
Featured image from Unsplash.com, charts from TradingView.com, CryptoQuant.com