Bitcoin Short-Term Holders Now Capitulating: Bottom Here?

On-chain data shows the Bitcoin short-term holders have started selling at a loss. Here’s what this could mean for the cryptocurrency’s price.

As pointed out by CryptoQuant author Axel Adler Jr in a new post on X, the Bitcoin Spent Output Profit Ratio (SOPR) of the short-term holders has declined into the red zone recently.

The “SOPR” here refers to an on-chain indicator that tells us whether the BTC investors are selling their coins at a profit or loss. The metric works by going through the transaction history of each coin being sold/transferred on the network to see what price it was transacted at prior to this.

If the last transfer price of the coin was less than the current spot value it’s being sold at now, then its sale could be assumed to be leading to profit realization. Similarly, transactions of the tokens of the opposite type correspond to loss-taking. The SOPR adds up the profits and losses being realized across the network in this manner and calculates what their ratio stands at.

In the context of the current topic, the SOPR of only a particular segment of the sector is of interest: the short-term holders (STHs). This cohort is made up of the investors who bought their coins within the past 155 days.

When the indicator has a value greater than 1, it means the STHs as a whole are selling their coins at a profit. On the other hand, it is under the threshold implies loss realization is dominant among these holders.

Now, here is a chart that shows the trend in the 7-day simple moving average (SMA) of the Bitcoin STH SOPR over the past decade:

As is visible in the above graph, the 7-day SMA of the Bitcoin STH SOPR shot up to high levels above the 1 mark during the last couple of months of 2024, implying the group was participating in significant profit-taking during the asset’s run to new all-time highs.

This wasn’t anything unusual, as STHs have historically proven themselves to represent the fickle-minded side of the market, who sell at first sight of any major change in the market, like a rally or crash.

Predictably, with the market downturn that has followed in the last few weeks, the STHs have shown another shift, as their profit-taking has calmed down and loss-taking has started taking over. The 7-day SMA of the indicator has declined to 0.99, which suggests the loss realization is now just ahead of the profit realization.

From the chart, it’s apparent that past capitulation events have generally coincided with tops for Bitcoin. So far, though, the level of loss-taking isn’t anything too notable, which may suggest the indicator could have to decline a bit more before BTC finds a bullish reversal.

Bitcoin has erased the recent recovery as its price has seen another 3% plunge during the past day, which has taken it to $91,600.