Bitcoin Faces Increased Downside Risk: Selling Pressure Grows as STH SOPR Drops Below 1

Bitcoin Faces Increased Downside Risk: Selling Pressure Grows as STH SOPR Drops Below 1

Bitcoin has experienced significant selling pressure in recent sessions, causing market participants to feel increasingly uncertain about its short-term direction. On Wednesday, BTC made a brief leap from around $86,000 to nearly $90,000, providing a momentary respite for short-term investors after a prolonged period of price declines.

However, this uptick quickly faded as the price retraced to the $86,000 mark, indicating that sellers are still firmly in control. This unsuccessful recovery attempt has negatively impacted market sentiment, particularly among short-term holders who purchased Bitcoin at higher prices during the previous stabilization phase. A report by Axel Adler reveals that this group is currently facing substantial stress, as Bitcoin's price has dipped below their average purchase price. This situation often triggers reactive selling.

This mounting pressure is further reflected in the Short-Term Holder Spent Output Profit Ratio (STH-SOPR, over 30 days), which has fallen to 0.98. This metric suggests that, on average, short-term holders are incurring losses when they sell, often leading to decreased confidence and increased sensitivity to further downward moves.

Bitcoin Short-Term Holder SOPR | Source: CryptoQuant

With Bitcoin struggling to maintain its recent recoveries and short-term investors facing losses, the market finds itself in a precarious situation. The coming days are crucial for determining whether this pressure will lead to deeper capitulation or evolve into a stabilization phase.

Short-Term Holders Feel the Pressure as Selling Increases

According to Adler, the Short-Term Holder Spent Output Profit Ratio (STH-SOPR 30D) is an essential indicator of stress in the short-term market. It assesses whether recent bitcoin sales have been profitable or resulted in losses. A value above one indicates profitable sales, whereas below one indicates realizations of losses.

Historically, prolonged periods below one signal declining confidence and raise the risk of additional downward movements, as the behavior of loss-taking can cascade into increased selling pressure. If the SOPR continues to decline, it may exacerbate these dynamics and potentially lead to new local lows.

Conversely, a significant recovery would necessitate the metric rising above one and remaining there, which would indicate that selling pressure is being absorbed and losses are less prevalent.

This stress is further illustrated by the Short-Term Holders Positive vs. Negative Sentiment chart. This indicator categorizes holders based on their profit or loss status. Over the past five weeks, sentiment has sharply shifted toward negative territory, as indicated by the orange and purple zones.

Bitcoin Short-Term Holders Positive vs Negative Sentiment | Source: CryptoQuant

The increasing number of holders operating at a loss raises the likelihood of panic-driven selling. Together, the charts consistently highlight that short-term investors are under strain, with the current environment remaining fragile until signs of relief become evident.

Bitcoin Tests Key Support Levels Amid Ongoing Bearish Trends

Bitcoin continues to face selling pressure, with the price consolidating around the $87,000 mark after a sharp correction from the October highs near $125,000. The rejection from the upper price range indicates a significant shift in market structure, as Bitcoin has lost both the 50-day and 100-day moving averages and struggled to regain them in subsequent rebounds. The downward trajectory of the blue moving average underscores the short- to medium-term bearish outlook.

BTC Facing Key Support | Source: BTCUSDT chart on TradingView

Price is currently hovering just above the 200-day moving average, shown in red, which aligns with the $86,000 to $88,000 range. This area serves as a crucial point of long-term demand and structural support. Historically, extended closes below the 200-day average have coincided with deeper corrections or prolonged consolidation periods.

Volume trends contribute to a cautious perspective. Selling pressure significantly increased during the breakdown in October and November, while recent recovery attempts have occurred with comparatively low trading volumes. This suggests that price stabilization is being driven more by short-covering and tactical buying rather than substantial demand from buyers.

Structurally, Bitcoin has been forming lower highs since its peak, making the overall trend vulnerable. For a recovery to transpire, Bitcoin must reclaim the $95,000 to $100,000 range and hold above the descending moving averages. Until that occurs, the outlook favors continued consolidation or heightened downside risk within the long-term support zone.

Key Takeaways

Bitcoin is currently facing significant selling pressure and uncertainty in the market.
Short-term holders are experiencing stress as many are operating at a loss, indicated by the STH-SOPR metric below 1.
The current environment is fragile, increasing the risk of panic selling among holders.
Bitcoin is testing critical support levels, particularly around the $86,000-$88,000 zone, with caution advised due to potential further downside movements.