Bitcoin Short-Term Holders Sell at a Loss, Long-Term Holders See Opportunity

According to CryptoQuant, a platform that provides on-chain data and analysis for various cryptocurrencies, the Bitcoin Short Term Holder Spent Output Profit Ratio (STH-SOPR) has been below 1 for most of the past month, indicating that short-term holders are selling their coins at a loss.

The STH-SOPR is a metric that measures the ratio of the price sold versus the price paid for Bitcoin that has been held for more than 1 hour and less than 155 days. A value above 1 means that short-term holders are realizing a profit, while a value below 1 means that they are realizing a loss.

The STH-SOPR has been declining since mid-November 2023, when Bitcoin reached its all-time high of over $100,000. Since then, the price of Bitcoin has dropped by more than 50%, reaching a low of $47,000 on January 28, 2024. This has caused many short-term holders to panic sell their coins, hoping to cut their losses.

Bitcoin: Short Term Holder SOPR (SMA 7) | Source: CryptoQuant

However, this may also present an opportunity for long-term holders, who have a different perspective on the market. The Long Term Holder Spent Output Profit Ratio (LTH-SOPR), which measures the same ratio for Bitcoin that has been held for more than 155 days, has been above 1 for most of the past year, indicating that long-term holders are still in profit.

Long-term holders, also known as whales, are more likely to see the current market situation as a buying opportunity, rather than a reason to sell. They may use their accumulated wealth and experience to buy up the coins that short-term holders are dumping, creating a positive feedback loop that could drive the price up again.

Moreover, long-term holders may also use a strategy called Dollar Cost Averaging (DCA), which involves buying a fixed amount of Bitcoin at regular intervals, regardless of the price fluctuations. This way, they can lower their average cost per coin and increase their potential returns in the long run.

Therefore, rather than blindly trusting the STH-SOPR indicator, which may reflect the emotions and sentiments of short-term holders, investors may benefit from following the example of long-term holders, who have a more rational and strategic approach to the market. By doing so, they may be able to take advantage of the current dip and prepare for the next bull run.

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