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Imagine this. At the beginning of the year, you bought Bitcoin (BTC) at around $30,000 and expected the cryptocurrency to rise to $35,000 or $40,000. But it didn’t. Then, while listening to Johnny Cash’s “I’m Busted,” you remember how low your portfolio is and the lyrics “I’ve got a drying cow and a non-laying chicken” come to mind. How would you feel or what action would you take? Crypto investor Gaah revealed that this is the situation that Short-Term Holders (STHs) of Bitcoin find themselves in.
Is Bitcoin Worth Buying?
Gaah used the Short-Term Holder Spent Output Profit Ratio (STH-SOPR) to explain the current BTC buying/selling situation on CryptoQuant. At the time of writing, STH-SOPR was at its lowest level in the past eight months.
STH-SOPR is known as the ratio of accounts that have been active for more than 1 hour and less than 155 days. Values greater than 1 indicate that holders are selling at a profit, while values less than 1 indicate that holders are selling at a loss.
Gaah explained that the metric showed a significant amount of realized losses, similar to the season when the price of BTC was $17,000. He noted:
The current loss realized is of the same magnitude as when Bitcoin was priced in the $17,000 range eight months ago.
In February, Gaah reported that STH-SOPR reached its highest level in 14 months. During this period, short-term holders accumulated, leading to a significant increase in the price of Bitcoin.
Highlighting Opportunities in Bitcoin
Meanwhile, traders noted that this is not a time to fear but rather a hidden opportunity. This view is supported by history, and it was stated:
Historically, reaching values within the green box (0.98-0.94) has created opportunities for significant returns in periods when losses are excessively realized by investors.
To evaluate whether the current downtrend presents an accumulation opportunity, let’s consider the Market Value to Realized Value (MVRV) ratio. The MVRV ratio is used to assess the valuation status of an asset and evaluate its profitability.
At the time of writing this article, Bitcoin’s 30-day MVRV ratio was -3.42%, which is consistent with the STH-SOPR indicators. However, it also implies that Bitcoin is in an accumulation zone, and investors who decide to accumulate may achieve greater returns. Gaah concluded the analysis by stating that a bullish trend may emerge soon. However, he emphasized the potential for further downward movement before the rise.
