Bitcoin STH SOPR approaches critical level between profit and loss

A technical indicator for Bitcoin is at a decisive point. The STH SOPR, a metric that shows whether short-term holders are selling their Bitcoin at a profit or a loss, currently stands at 0.997 and is moving towards the neutral threshold of 1. Analyst Darkfost points out that this level has historically been a recurring stumbling block during bear markets.

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In short:

• The Bitcoin STH SOPR stands at 0.997, just below the neutral threshold of 1
• During the current bear market, this level was previously rejected in January and May
• Only if the SOPR remains structurally above 1 can a sustainable upward move get underway

What the STH SOPR tells us

The STH SOPR measures whether short-term investors, people who bought Bitcoin relatively recently, are selling their coins at a profit or a loss. A value above 1 means that, on average, coins are being sold at a profit, while a value below 1 points to losses. At the moment, the indicator stands at 0.997, indicating that most recent sellers are taking a slight loss.

Darkfost explains that the cost basis of short-term holders during a bear market functions as a kind of exit gate. Every time the SOPR reaches the neutral line of 1, many holders shed their positions, pushing the indicator back down. This pattern was previously visible in the 2023 bear market and also in the current cycle, with rejections around this level at the end of January and in May this year.

Profit in the market is necessary for recovery

As long as losses prevail, a bear market continues. That was also evident in 2023, when the SOPR remained stuck below 1 for several months before a structural recovery got underway. Only when profit returned and the indicator managed to hold above the neutral threshold did positive momentum emerge.

Darkfost argues that a certain degree of profit in the market is actually necessary. It motivates investors to hold positions or bring in new capital, but excessively high profits attract selling pressure. The coming period will be decisive: will the SOPR break through and hold the level of 1, or will there be another rejection like earlier this year?