Recently, valuations have surfaced that reveal that long-term Bitcoin holders are gradually weaning themselves off of their huge profits, and that depending on future developments, this could have some impact on the price.
Monthly average SOPR for long-term holders is below 1
In a recent QuickTake post on CryptoQuant, pseudonymous on-chain analyst Darkfost revealed that long-term Bitcoin holders are entering a vulnerable phase in the current cycle. This post is based on measurements taken from the SOPR indicator for BTC: Long Term Holders (LTH). This indicator tracks whether coins moved by long-term holders were made at a profit or loss.
SOPR values above 1 reflect that holders of this category are realizing profits on average, while values below 1 indicate that these coins are trading at a loss. According to Darkfost, the current measurement of the SOPR metric is below the critical 1 level, currently sitting at around 0.98.
This is a sign that Bitcoin LTH, which is generally the strongest investor hand in the market, is starting to realize losses on a monthly basis. Interestingly, the scenario is somewhat different in the annual time frame.
Annual LTH SOPR remains positive, but the trend is down — Analyst
Dirkforst further highlights that although the monthly period is leaning towards the red zone, the annualized SOPR is still well within positive territory, measuring around 1.84. According to analysts, this implicitly equates to about 84% of the average realized profit.
However, annualized profits are on the decline and are decreasing slowly. Of note is that the LTH SOPR on the chart has not exceeded 3.4 throughout the current cycle. This value is about half the reading seen at the peak of the previous cycle. Interestingly, this is also less than four times the peak of the previous two cycles, suggesting that the distribution among this investor cohort is less impulsive.
Furthermore, Darkforst recalls historical data and shows that a bear market formed only after SOPR declined towards the 0.6 region, a level that correlates with average realized losses of around 40%. Therefore, although the current reading of the indicator is below 1 every month, it is still far from the zone representing capitulation.
For now, long-term holders are entering what appears to be a transition period. In a scenario where long-term holders realize that their profits continue to decline, the selling pressure could now ease from this side. As of this writing, the price of Bitcoin is valued at approximately $64,247, reflecting a decline of 4.85% over the past day.
