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- Short-term bonds sold at a loss, especially on the retail side.
- Buying BTC at its current value can lead to greater returns in the near future.
Picture this: you bought Bitcoin [BTC] around $30,000 earlier this year, with the coin expected to rise to $35,000 or $40,000. But that didn’t happen. Then you remember how bad your wallet is while listening to Johnny Cash’s “I’m Busted,” and the lyric “I’ve got a cow that’s dry, and a chicken that won’t lay” pops up.
How many 1,10,100 BTC worth today?
How do you think you would feel or what action would you take? That appears to be the state Bitcoin Short-Term Holders (STHs) are in, revealed pseudonymous crypto trader Gaah.
Cherish and lose and cushion the fall
Go, in his publication on CryptoQuant, used the Short Term Output Profit Ratio (STH-SOPR) to explain the current sell/buy status of BTC. At the time of writing, the STH-SOPR was at its lowest point in eight months.
The STH-SOPR is the ratio of the output spent (more than 1 hour and less than 155 days alive) to the gain at the time of the window. Values greater than 1 mean holders sell at a profit, while values less than 1 mean holders sell at a loss.
Source: CryptoQuant
Gaah revealed that the metrics showed a lot of realized losses, similar to the season when the price of BTC hit $17,000. He noticed:
“The current loss realized on average is the same size as eight months ago, when the price of Bitcoin was around $17,000.”
In February, Gaah reported the STH-SOPR reached a 14-month high. During this period, short-term holders mainly come from the retail sector cohort accumulated. As a result, the Bitcoin price rose significantly.
Before you miss the open opportunity
Meanwhile, the trader believed that now was not the time to be afraid. Instead, he noted that there was an opportunity on the lurk in the corner. He supported this view with history, saying:
“Historically, reaching values within the green box (0.98-0.94) during periods of extreme loss realization by these investors has provided opportunities for large returns later on.”
To assess whether the current downtrend offers an accumulation opportunity, we look at the market value to realized value (MVRV) ratio. The MVRV ratio is used to assess profitability while monitoring an asset’s valuation condition.
Is your wallet green? Check the Bitcoin Profit Calculator
At the time of writing, Bitcoins are 30-day MVRV ratio amounted to -3.42%. This value was consistent with the STH-SOPR indications. However, it also means that Bitcoin was in opportunity territory, and investors who decide to accumulate can reap greater returns.
Source: Sentiment
Gaah concluded his analysis, noting that an uptrend could emerge soon. However, he pointed out that there is great potential for more downtrend ahead of the uptick.