Why Bitcoin short-term holders should not accept defeat yet

Posted: September 8, 2023

• Short-term holders were selling at a loss, especially on the retail side.
• Buying BTC at the current value may lead to bigger returns in the near future.

Picture this— you bought Bitcoin [BTC] around $30,000 earlier in the year, expecting the coin to rise as high as $35,000 or $40,000. But it didn’t. Then, you remember how down your portfolio is while listening to Johnny Cash’s “I’m Busted”, and the lyrics “I got a cow that’s gone dry, and a hen that won’t lay” comes up.

How much are 1,10,100, BTCs worth today?

How do you think you’d feel or what action would you take? That seems to be the condition Bitcoin Short-Term Holders (STHs) find themselves in, pseudonymous crypto trader Gaah disclosed. 

Basking and losses and taking the fall

Gaah, in his publication on CryptoQuant, used the Short Term Output Profit Ratio (STH-SOPR) to explain the current BTC selling/buying state. At the time of writing, the STH-SOPR was at an eight-month low.

The STH-SOPR is a ratio of spent outputs (alive more than 1 hour and less than 155 days) in profit at the time of the window. Values greater than 1 mean holders are selling at a profit while values less than 1 mean holders are selling at a loss.

Source: CryptoQuant

Gaah revealed that the metric showed there was a lot of realized loss similar to the season when BTC’s price was $17,000. He noted:

“The current loss being realized, on average, is in the same magnitude as 8 months ago when Bitcoin was being priced in the $17,000 range.”

In February, Gaah reported the STH-SOPR reaching a 14-month high. During this period, short-term holders, especially from the retail cohort accumulated. As a result, the Bitcoin price rose significantly. 

Before you miss the open opportunity 

In the meantime, the trader opined that this was not the time to fear. Instead, he noted that there was an opportunity lurking in the corner. He backed this opinion up with history saying that:

“Historically, during periods of extreme realization of losses by these investors, reaching values within the green box (0.98-0.94) has generated opportunities for great returns later on.”

To evaluate if the current downtrend offers an accumulation opportunity, let’s consider the Market Value to Realized Value (MVRV) ratio. The MVRV ratio is used to assess profitability while checking an asset’s valuation condition.

Is your portfolio green? Check the Bitcoin Profit Calculator

At the time of writing, Bitcoins’ 30-day MVRV ratio was -3.42%. This value aligned with the STH-SOPR indications. However, it also means that Bitcoin was in an opportunity area, and investors who decide to accumulate may get bigger returns.

Source: Santiment

Gaah concluded his analysis, noting that an uptrend could occur soon. He, however, pointed out that there is a high potential for more downside before the uptick.