Bitcoin Enters Fragile Phase As Annual LTH Realized Profits Taper — Details

A recent evaluation has surfaced that reveals that Bitcoin’s long-term holders are slowly easing away from their deep profits, and that this could affect prices in either way, depending on further developments.

Long-Term Holder Average Monthly SOPR Slips Under 1 

In a recent QuickTake post on CryptoQuant, a pseudonymous on-chain analyst, Darkfost, reveals that Bitcoin’s long-term holders are entering a fragile phase in the current cycle. This post is based on readings obtained from the BTC: Long-Term Holders (LTH) SOPR metric, which tracks if coins moved by Long-Term Holders are done profitably, or at a loss.

A SOPR value above 1 reflects that holders of this category are, on average, realizing profits, while a reading below 1 signals that these coins are being moved at a loss. According to Darkfost, the current readings from the SOPR metric have fallen under the critical 1 level, and currently sit around 0.98

This is a sign that Bitcoin’s LTHs, which are typically the strongest investor hands in the market, are beginning to realize losses on a monthly basis. Interestingly, the scenario is somewhat different on the annual timeframe.

Annual LTH SOPR Still Positive, But Trend Is Falling — Analyst 

Darkfost further highlights that, although the monthly timeframe leans towards the red zone, the annualized SOPR still sits well into positive territory, with readings at approximately 1.84. According to the analyst, this represents about 84% in average realized gains, by implication.

However, the annualized profits have taken on a downward trend and have been slowly falling. Notably, the LTH SOPR has not gone higher than 3.4 on the charts throughout the current cycle, a value that is approximately half the readings seen in the previous cycle’s peak. Interestingly, this is also less than four times the peak of the two previous cycles, suggesting a less impulsive distribution among this investor cohort.

Furthermore, Darkfost conjures historical data, showing that bear markets have formed only after the SOPR dropped towards the 0.6 region, a level that correlates with average realized losses of approximately 40%. Hence, while the current reading on the metric is below 1 every month, it is still far from the zone representing capitulation.

For now, the Long-term holders have entered what seems to be a transitional phase. In the scenario where Long-Term Holder realized profits continue to fade, selling pressure might in turn erode from this side. As of this writing, the Bitcoin price stands at a valuation of approximately $64,247, reflecting a loss of 4.85% over the past day.