Bitcoin's LTH SOPR Indicates Possible Early Capitulation Amid Limited Selling Pressure

Bitcoin LTH SOPR Signals Early Capitulation, But Selling Pressure Remains Contained

Summary:
Bitcoin has been experiencing a prolonged consolidation phase since late November, leading to speculation about a significant price movement. While some analysts anticipate an upward trend, others caution about potential further declines. Notably, signs of capitulation among long-term holders (LTH) are appearing, which could impact Bitcoin's future direction.

Key Takeaways:

Bitcoin is currently consolidating after a recent correction, with traders divided on future movements.
Signs of potential capitulation are evident among long-term holders as they face unrealized losses.
The LTH SOPR metric indicates selling at a loss, reflecting stress among some investors.
A key resistance level exists between $92,000 and $94,000; a sustained break above this could signal renewed strength.

Signs of Long-Term Holder Capitulation

The Long-Term Holder SOPR (Spent Output Profit Ratio) is currently indicating behaviors typically seen during bear market phases. This metric evaluates whether coins held for over six months are being sold at a profit or a loss, providing crucial insights into the sentiment of the most steadfast Bitcoin investors.

Bitcoin Long-Term Holders SOPR High or Low Profit | Source: CryptoQuant

Recently, the LTH SOPR dropped briefly below the key 1.0 threshold, suggesting that some long-term holders, particularly younger ones, are beginning to capitulate by selling at a loss. Historically, this trend indicates increasing stress among those who bought at higher prices and are now experiencing significant drawdowns.

Currently, however, this behavior appears to be limited. The 30-day moving average of the LTH SOPR is still a healthy 1.18, indicating that long-term holders have seen an average profit of 18% over the past month. While broad capitulation has not yet occurred, it’s noteworthy that this figure is significantly below the annual average of about 2.0, showing a slowdown in profits realized.

If the situation worsens, it could signal bearishness in the short term due to increased selling pressure. On the other hand, a decline in realized profits might suggest that sellers are running out of steam. For a bullish market revival, the LTH SOPR must stabilize and start trending upwards, indicating renewed confidence among long-term holders.

Bitcoin Consolidates Below Critical Resistance

Bitcoin is continuing to trade within a well-defined range after the steep correction from its October highs. On the weekly chart, the price is hovering just below the resistance zone between $92,000 and $94,000, which previously provided support before the recent breakdown. This area is now a critical point for the market structure.

BTC consolidates above weekly support level | Source: BTCUSDT chart on TradingView

Despite recent price fluctuations, Bitcoin remains above its rising 200-day moving average, which is currently positioned near the mid-$80,000 range. This indicates that the overall trend is still healthy, even as immediate momentum weakens. The 100-day moving average has flattened, reflecting a decline in upward momentum, while the 50-day average is trying to stabilize after turning down during the sell-off.

The price action over recent weeks shows a series of higher lows, suggesting that buyers are gradually entering and absorbing selling pressure. However, trading volume has dropped during this consolidation period, indicating that neither side of the market has strong conviction. Such behavior is typical of compression phases that often signal larger upcoming moves.

A sustained breakout and weekly close above $94,000 would demonstrate renewed bullish strength and pave the way for a rise toward the $100,000 to $105,000 range. Conversely, failing to maintain support in the $86,000 to $88,000 zone would heighten downside risks and shift the focus to deeper price corrections. Currently, Bitcoin remains in a balanced state, building tension for its next significant movement.

Featured image from ChatGPT, chart from TradingView.com.