Why Did Bitcoin Plunge Under $58,000? On-Chain Data Says This
July 04 2024 - 5:00PM
NEWSBTC
Bitcoin has observed a crash below the $58,000 level today. Here’s
what could be a potential cause for it, according to on-chain data.
Bitcoin Long-Term Holders Have Just Taken Large Profits As pointed
out by an analyst in a CryptoQuant Quicktake post, the Bitcoin
long-term holders harvested a large amount of profits during the
latest price drawdown. Related Reading: These Are The Altcoins In
Buy Zone, Analytics Firm Reveals The on-chain metric of interest
here is the “Spent Output Profit Ratio” (SOPR), which basically
tells about whether the BTC investors are selling/transferring
their coins at a profit or loss. When the value of this indicator
is greater than 1, it means the holders as a whole are realizing a
net profit with their selling right now. On the other hand, the
metric being under this threshold implies the dominance of
loss-taking in the market. In the context of the current topic, the
SOPR of a specific segment of the user base is of interest: the
long-term holders (LTHs). This cohort includes the investors who
have been holding onto their coins since more than 155 days ago.
The LTHs are considered to be the resolute side of the market, as
they rarely sell regardless of whatever may be going on in the
wider market. As such, the times that they do sell can be all the
more noteworthy. It would appear that the recent Bitcoin market
conditions have managed to break even these diamond hands, as the
below chart for their SOPR suggests. As is visible in the above
graph, the Bitcoin LTH SOPR has seen a high density of spikes above
the 1 mark during the past day. This would suggest that these
HODLers have moved some coins that were previously carrying
significant profits. More particularly, the indicator hit a value
of more than 10 during a lot of these spikes, implying that this
group realized profits equal to over ten times the losses during
those transactions. As the LTH SOPR spikes came just before BTC’s
descent towards the levels under $58,000, it would seem possible
that this profit-taking push from these normally-resolute investors
was at least in part behind the crash. Another indicator, the
Bitcoin Spent Output Age Bands (SOAB), has revealed the breakdown
of these LTH transactions. From the chart, it’s apparent that the
most active LTH segment during this selloff was the 5-year to
7-year group, meaning that most of the coins sold were previously
dormant between 5 and 7 years ago. Related Reading: Crypto Analyst
Says Next Bitcoin Target Is $78,700 If BTC Breaks This Resistance
It’s hard to say why these old entities have suddenly decided to
sell after sitting out a whole cycle, but if this is the start of a
selling spree from them, then things might get even worse for
Bitcoin. BTC Price Bitcoin had very briefly slipped under the
$57,000 level during the latest crash, but the asset appears to
have made some recovery since then, as it’s back at $57,700.
Featured image from Dall-E, CryptoQuant.com, chart from
TradingView.com
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