On-chain data shows that Bitcoin HODLers can still sell for a profit while weak hands experience a major capitulation event.
Bitcoin Diamond Hands Still Selling Comfortably at Profit
As pointed out by CryptoQuant Head of Research Julio Moreno in a new after On X, BTC short-term investors have capitulated during this latest market downturn.
The “short term holders” (STHs) make up one of the two major divisions of the Bitcoin user base based on holding time, with the other group being the “long term holders” (LTHs).
The boundary between the two groups is 155 days, with investors who invest less than 155 days falling into the STHs and investors who have more falling into the LTHs.
Statistically, the longer an investor holds onto his coins, the less likely he is to sell or transfer them at any point. So, STHs represent the weak-willed side of the market, while LTHs include the HODLers.
During the last crash, both cohorts showed a response, but this response was very different between the two. To show this difference, Moreno used the “Issued output profit ratio” (SOPR) indicator.
The SOPR essentially tells us whether a certain group is currently selling Bitcoin at a profit or a loss. If the metric is above 1, it means that members of the group are making a profit, while a metric below 1 indicates that taking a loss is the dominant selling method.
Here is a chart showing the recent trend in the Bitcoin SOPR for the STH and LTH cohorts:
The difference between the behavior of the STHs and LTHs | Source: @jjcmoreno on X
As can be seen in the chart, Bitcoin STH SOPR was mostly below 1 during the last price drop. This means that these investors sold at a loss.
At its worst, the indicator had even fallen below 0.8, indicating that the cohort had suffered a loss of more than 20%. Clearly, these fickle hands were quite panicked by the crash.
While STHs are capitulating, LTHs are still taking net profits as the SOPR for them has remained well above the 1 level. The indicator even reached a notable level during the rebound that BTC saw from its lows, suggesting that these diamond hands were sold for significant profits.
Also some STHs managed to make profit during this recovery, but as you can see in the graph, the statistic only slightly exceeded the 1 mark and that too for a short time. The profit realization was therefore not significant and only lasted a short time.
BTC price
At the time of writing, Bitcoin price is trading at around $55,000, down over 17% over the past week.
Looks like the price of the coin has been sliding down recently | Source: BTCUSD on TradingView
Main image from Dall-E, CryptoQuant.com, chart from TradingView.com