Bitcoin LTH Profit-Taking Collapses: Is Smart Money Done Selling?

Overview

Bitcoin is currently trading below the $80,000 mark amidst ongoing selling pressure and uncertainty in the market. Recent developments highlight a significant decline in holder profitability, particularly among long-term holders, which raises questions about the future direction of the cryptocurrency.

Current Market Dynamics

Bitcoin’s price action indicates a fragile market environment characterized by limited buying conviction and a cautious risk sentiment across the cryptocurrency landscape. The price has been struggling, recently hitting a local low near $77,900, which aligns with a notable drop in the Spent Output Profit Ratio (SOPR). The SOPR is a crucial on-chain indicator that measures whether coins are being spent at a profit or a loss, providing insights into the behavior of different investor groups during market stress.

Recent analysis from CryptoQuant reveals that the SOPR has fallen to its lowest levels in the past year, indicating that long-term holders (LTHs) are realizing significantly less profit or are refraining from selling at current prices. This shift suggests a growing reluctance among LTHs to distribute their holdings into a weakening market, even as short-term holders (STHs) face losses.

The convergence of LTHs and STHs in terms of profitability is particularly noteworthy. The SOPR ratio has approached the critical level of 1.0, a threshold that signifies a potential turning point in market dynamics. Historically, low SOPR readings have been associated with reduced selling activity from “smart money,” allowing selling pressure to ease. This behavior could pave the way for either market accumulation or the formation of local market floors, although the timing of such developments can vary widely.

From Author

The recent decline in the SOPR and its correlation with Bitcoin’s price suggests that the market may be experiencing a phase of exhaustion rather than outright capitulation. Two scenarios emerge from this analysis: one where the SOPR stabilizes around the 1.0 level, indicating that heavy distribution from long-term investors is largely exhausted, and another where the sharp price drop leads to extended sideways consolidation as the market digests recent volatility.

Furthermore, Bitcoin’s weekly chart shows the cryptocurrency remains under sustained pressure, with the price hovering around the $78,000 area. Notably, the price is trading below both the 100-day and 200-day moving averages, reinforcing a bearish sentiment. The previously established support zone between $85,000 and $90,000 has now turned into a resistance level, reflecting a significant change in market structure.

Impact on the Crypto Market

• Bitcoin’s price below $80,000 signifies ongoing selling pressure and heightened market uncertainty.
• The decline in SOPR indicates that long-term holders are either realizing less profit or opting not to sell, potentially leading to reduced selling pressure.
• The synchronization between Bitcoin’s price decline and SOPR deterioration suggests a market under stress rather than a routine pullback.
• The current market dynamics may lead to either a relief bounce if SOPR stabilizes or extended consolidation as the market adjusts to recent volatility.
• Bitcoin’s inability to reclaim key moving averages and the shift from a distribution phase to a consolidation phase indicates ongoing downside risks.