Bitcoin Enters Fragile Phase as Annual Long-Term Holder Realized Profits Decline

Bitcoin is currently experiencing a fragile phase as long-term holders begin to see a reduction in their considerable profits. This shift may influence price dynamics in significant ways, depending on future market movements.

Key Takeaways

Bitcoin's long-term holders are now facing reduced profits, indicated by the SOPR metric dropping below 1.
The monthly SOPR decline suggests these holders are realizing losses.
The annual SOPR remains positive at approximately 1.84, indicating average realized gains of about 84%.
Historical trends point to a more severe market downturn occurring only after SOPR dips close to 0.6, suggesting we are not yet in a capitulation phase.
Current Bitcoin price sits at around $64,247, down by nearly 5% in the last 24 hours.

Bitcoin

Understanding the Recent Trends: Long-Term Holder Average Monthly SOPR Declines Below 1

In a recent QuickTake post by the on-chain analyst known as Darkfost, it's noted that Bitcoin's long-term holders (LTH) are entering a delicate stage in the ongoing market cycle. This analysis relies on the BTC: Long-Term Holders (LTH) SOPR (Spent Output Profit Ratio) metric, which evaluates whether the coins being moved by long-term holders are being sold at a profit or at a loss.

A SOPR value exceeding 1 indicates that, on average, holders in this category are realizing profits, while a value below 1 indicates that these coins are being transferred at a loss. Currently, the SOPR metric has dipped to approximately 0.98, suggesting that long-term holders—who are generally regarded as the most steadfast investors—are now starting to report monthly losses. However, the situation appears somewhat different when viewed on an annual basis.

Steady but Declining: Annual LTH SOPR Still Positive

Darkfost emphasizes that, despite the negative monthly SOPR figures, the annualized SOPR remains positively positioned, at about 1.84. This figure suggests that long-term holders are enjoying an average gain of around 84%. Yet, the annualized profits have begun to follow a downward trajectory. Notably, the LTH SOPR has yet to exceed 3.4 during the current cycle, a figure that is approximately half the numbers observed at the peak of the previous cycle. Moreover, this is significantly less than four times the highs recorded during the two previous cycles. This indicates a less aggressive distribution pattern within this investor group.

Bitcoin Source: CryptoQuant

Darkfost also references historical data that suggests bear markets typically emerge only after the SOPR falls into the 0.6 range, a level linked to an average realized loss of about 40%. While the current SOPR readings hover below 1 each month, we are still far from a capitulation zone.

At present, long-term holders seem to be navigating a transitional phase. If the downward trend in realized profits continues, it may lead to increased selling pressure from this group. As of the time of writing, Bitcoin is valued at approximately $64,247, showing a decrease of 4.85% over the last day.

Bitcoin BTC trading at $64,297 on the daily chart | Source: BTCUSDT chart on Tradingview.com