A quant has explained how bitcoin could still have room to rise based on the trend forming in this popular on-chain indicator.
bitcoin's Short-Term SOPR Headline May Not Be Overheated Yet
In a quick shot from CryptoQuant <a target="_blank" href="https://cryptoquant.com/insights/quicktake/673b060f3003544c23b91c54-bitcoin-still-has-room-to-rise-SOPR-indicates-healthy-growth” target=”_blank” rel=”noopener nofollow”>mailAn analyst analyzed the spent production profit ratio (SOPR) of short-term bitcoin holders. The SOPR refers to an indicator that tells us whether btc investors are selling their coins at a profit or loss.
This metric works by reviewing the transaction history of each token that is sold to verify the price it was transferred at before this. If the previous transaction value of any currency was less than the current spot price at which it is now moving, its sale contributes to making a profit.
Similarly, transactions with currencies of the opposite type lead to the realization of losses. The SOPR sums these gains and losses for the entire network and calculates their ratio.
In the context of the current discussion, bitcoin's SOPR of the entire user base is not of interest, but rather that of only a specific segment of it: short-term holders (STH). STHs include btc investors who purchased their coins in the last 155 days.
This cohort represents the fickle side of the btc sector, which easily tends to sell whenever a notable change occurs in the market, such as a price rally or drop.
Now, here is a chart showing the trend of bitcoin STH SOPR over the past few years:
<img data-recalc-dims="1" decoding="async" class="alignnone aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/11/Bitcoin-still-has-room-to-rise-Quant-explains-why.png" alt="bitcoin STH SOPR” width=”1280″ height=”562″/>
The value of the metric appears to have been going up in recent days | Source: <a target="_blank" href="https://cryptoquant.com/insights/quicktake/673b060f3003544c23b91c54-bitcoin-still-has-room-to-rise-SOPR-indicates-healthy-growth" target="_blank" rel="noopener nofollow">CryptoQuant
As you can see from the chart above, the bitcoin STH SOPR has remained above the 1 mark in recent months. In this zone, STH profit-taking exceeds loss-taking, so this cohort as a whole could be considered to be making a net profit on their sales.
Recently, the indicator has seen a sharp increase within this territory. The growth has coincided with the cryptocurrency's rally towards new all-time highs (ATH), suggesting that STHs have been falling further amid the profit-taking appeal offered by rising prices.
Historically, profit taking from this group has been something that has generally led to highs for the asset. However, as highlighted in the chart, the current value of the STH SOPR is still significantly below the zone that has historically signaled market euphoria.
That said, while the danger of a cyclical top may not exist at this time, the indicator is nonetheless within a zone where local highs have tended to occur for bitcoin. This year's first quarter high, for example, was also formed when the metric was in this region.
It now remains to be seen if there is enough demand in the market to end this wave of STH profit-taking, or if the asset would reach another high.
btc Price
bitcoin has fallen into a sideways movement in recent days as its price is still trading around $90,400.
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Looks like the price of the coin has shown stale action recently | Source: BTCUSDT on TradingView
Dall-E Featured Image, CryptoQuant.com, TradingView.com Chart
