Bitcoin (BTC) market indicators are getting a reset as investors nurse 4% weekly BTC price losses.
On January 10th, as stated in a Quicktake blog post, CryptoQuant, an on-chain analysis platform, signaled a potential opportunity for investors to purchase at a lower price.
Onchain data shows Bitcoin moving at a loss
This month, I’ve noticed a dip in my Bitcoin enthusiasm due to increased volatility that seems to be favoring the downside rather than the upswing. Regrettably, despite several attempts, we, the bulls, haven’t been able to maintain and hold the $100,000 mark.
One indication of growing capitulation among speculative investors, who are known for being more responsive to short-term price fluctuations, is a decrease in the spent output profit ratio (SOPR). This ratio measures the number of coins that have been sold at a loss, divided by the number of new coins entering circulation. When the SOPR drops, it suggests that investors are selling their holdings at a loss, which could indicate a bearish sentiment among this group.
The SOPR tracks the ratio of unspent transaction outputs (UTXOs) that were previously transacted at a gain or a loss relative to their most recent transaction.
The outcome provides a glimpse into investors’ readiness to invest coins whether they’re making a profit or suffering a loss. This allows analysts to understand the prevailing sentiments in the market.
At present, the Short-Term Holder SOPR (for entities holding Bitcoin for less than 155 days) stands lower than the break-even level of 1.0.
With Bitcoin’s decrease in value, more and more pessimistic news about it are becoming prominent on YouTube and mainstream news outlets. This suggests that investor sentiment towards the market is shifting towards a bearish stance,” as summarized by CryptoQuant contributor MAC_D.
“This is reflected in the short-term SOPR, which shows the market sentiment of short-term investors, at 0.987, indicating that investors holding for less than 6 months are selling Bitcoin at a loss.”
Despite appearing bearish at first glance, heavy losses in on-chain activity might signal good news for bulls. Historically, such capitulation among speculators tends to align with temporary low points in Bitcoin’s price, suggesting potential opportunities for buyers.
In August 2024, the STH-SOPR reached its lowest point in over three years. This occurrence happened concurrently with the first of two projected short-term lows for Bitcoin (BTC) to USD exchange rate, approximately $55,000, which have since remained stable.
Interestingly enough, history demonstrates that when short-term investors suffer losses, the market frequently exhibits an uptrend, providing a favorable opportunity for stockpiling – a concept that might seem counterintuitive but could prove beneficial.
Analysis: Selling BTC may be “very unwise”
According to reports from CryptoMoon, other indicators also suggest that there’s growing apprehension within the market.
This past week, the Crypto Fear & Greed Index moved back into “balanced” zones, reaching its lowest point since October.
As a crypto investor, I’m observing that the returns in this space are significantly greater compared to traditional markets, with the fear gauge standing at only 32 out of 100. This suggests a relatively calmer market atmosphere, despite the lingering sentiment of apprehension.
Concurrently, significant investors have boosted their Bitcoin holdings again following the holiday break. According to CryptoQuant, these large Bitcoin holders (whales) have added approximately 34,000 BTC between December 9 and January 8.
In simpler terms, MAC_D is suggesting that when short-term investors face losses (or ‘pain’), it typically creates favorable conditions for buying and building up assets, which is referred to as ‘accumulation’.
“If there is further decline from the current price, smart investors will likely accumulate the coins sold cheaply by short-term investors. Therefore, selling coins at this juncture might prove to be a very unwise decision.”
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2025-01-10 10:09