Bitcoin Like A Spring Waiting To Uncoil, Analyst Explains Why
June 05 2024 - 11:00AM
NEWSBTC
An on-chain analyst has explained how Bitcoin is sitting like a
coiled spring right now, a state the asset doesn’t usually stay in
for too long. Bitcoin Short-Term Holder Sell-Side Risk Ratio Has
Declined Recently In a new post on X, analyst Checkmate has
discussed the recent trend occurring in the Sell-Side Risk Ratio
for the Bitcoin short-term holders. The Sell-Side Risk Ratio here
refers to an indicator that tells us about how the absolute profit
and loss being locked in by the investors compares against the BTC
Realized Cap. The Realized Cap is basically a measure of the total
amount of capital that holders as a whole have used to purchase
their coins, as determined by on-chain data. Related Reading:
Bitcoin Not ‘Overvalued’ Yet, Says CryptoQuant CEO: Here’s Why
Thus, the Sell-Side Risk Ratio, which takes the ratio between the
sum of profit and loss with this initial investment, provides info
about how the profit or loss-taking from the investors looks like
relative to their cost basis. When the value of the indicator is
high, it means the holders are realizing a large profit or loss
right now. Such a trend may follow some sharp volatility in the
asset’s price. On the other hand, the metric being low implies that
investors are only selling coins close to their break-even level.
This kind of trend could suggest profit or loss-takers in the
market have become exhausted. In the context of the current topic,
the entire market’s Sell-Side Risk Ratio isn’t of interest, but
rather that of only a specific segment of it: the short-term
holders (STHs). These investors are typically defined as those who
acquired their coins within the past 155 days. The below chart
shows the trend in the metric for this cohort over the past decade:
As is visible in the graph, the Sell-Side Risk Ratio for the
Bitcoin STHs had shot up to a very high level when the rally
towards the new all-time high (ATH) had occurred earlier in the
year. Historically, the STHs have shown to be the fickle-minded
hands of the market, who sell easily at the sight of any FOMO or
FUD in the sector. As such, it’s not surprising to see that these
investors had ramped up their profit realization alongside the
rally. Related Reading: Bitcoin Has Solid On-Chain Cushion Below
$68,900: Stage Set For Fresh Rally? Since this peak, though, the
indicator has gone through a steep decline as the price of the
cryptocurrency has been stuck in endless consolidation. Following
the drawdown, the metric has now returned to relatively low levels.
It would appear that as the tight sideways movement has occurred,
sellers among the STHs have seen exhaustion. “Bitcoin is coiled
like a spring, and it usually doesn’t sit still like this for
long,” notes the analyst. With the asset’s price surging to $71,000
in the past day, it’s possible that this unwinding may already be
here. BTC Price Bitcoin has enjoyed an increase of around 3% in the
past 24 hours, which has now taken its price to $70,900. Featured
image from Dall-E, checkonchain.com, chart from TradingView.com
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