Why Did Bitcoin Plunge Under $58,000? On-Chain Data Says This

Bitcoin has observed a crash below the $58,000 level today. Here’s what could be a potential cause for it, according to on-chain data.

As pointed out by an analyst in a CryptoQuant Quicktake post, the Bitcoin long-term holders harvested a large amount of profits during the latest price drawdown.

The on-chain metric of interest here is the “Spent Output Profit Ratio” (SOPR), which basically tells about whether the BTC investors are selling/transferring their coins at a profit or loss. When the value of this indicator is greater than 1, it means the holders as a whole are realizing a net profit with their selling right now. On the other hand, the metric being under this threshold implies the dominance of loss-taking in the market.

In the context of the current topic, the SOPR of a specific segment of the user base is of interest: the long-term holders (LTHs). This cohort includes the investors who have been holding onto their coins since more than 155 days ago. The LTHs are considered to be the resolute side of the market, as they rarely sell regardless of whatever may be going on in the wider market. As such, the times that they do sell can be all the more noteworthy.

It would appear that the recent Bitcoin market conditions have managed to break even these diamond hands, as the below chart for their SOPR suggests.

As is visible in the above graph, the Bitcoin LTH SOPR has seen a high density of spikes above the 1 mark during the past day. This would suggest that these HODLers have moved some coins that were previously carrying significant profits.

More particularly, the indicator hit a value of more than 10 during a lot of these spikes, implying that this group realized profits equal to over ten times the losses during those transactions.

As the LTH SOPR spikes came just before BTC’s descent towards the levels under $58,000, it would seem possible that this profit-taking push from these normally-resolute investors was at least in part behind the crash.

Another indicator, the Bitcoin Spent Output Age Bands (SOAB), has revealed the breakdown of these LTH transactions.

From the chart, it’s apparent that the most active LTH segment during this selloff was the 5-year to 7-year group, meaning that most of the coins sold were previously dormant between 5 and 7 years ago.

It’s hard to say why these old entities have suddenly decided to sell after sitting out a whole cycle, but if this is the start of a selling spree from them, then things might get even worse for Bitcoin.

Bitcoin had very briefly slipped under the $57,000 level during the latest crash, but the asset appears to have made some recovery since then, as it’s back at $57,700.