Remphasis on chain data highlighted a significant trend: a wave of profit-taking by investors who have held Bitcoin (BTC) for less than five months.
As detailed by CryptoQuant’s latest data, this phenomenon is not just a random market movement, but an echo of patterns observed at the height of previous bull markets.
Profit-taking among short-term Bitcoin holders signals market shift
According to CryptoQuant, the Spent Output Profit Ratio (SOPR), a key metric in evaluating profits and losses from Bitcoin transactions over a specific period, presents a pronounced increase indicative of widespread profit making.
This tendency among short-term holders to liquidate their holdings for gains parallels historical market peaks and suggests a critical juncture for Bitcoin.
Crypto Dan, an experienced market analyst, emphasized the importance of this trend, stating, “This move is something that only happens once every few years,” highlighting the uniqueness and possible consequences of current market trends.
$BTC short term investors made big profits
“Regarding this adjustment, if we look at the SOPR, there was a large movement related to profit taking by short-term holders who held #BTC for less than 5 months.”
per @DanCoinInvestorLink 👇https://t.co/RqBtDm81hO
-CryptoQuant.com (@cryptoquant_com) March 18, 2024
New market forces at play: ETF entry set to rebalance the equation
While the SOPR metric can signal alarm signals reminiscent of the past bull market spikesThe crypto landscape is underpinned by factors that could mitigate the traditional results of this profit-taking.
Among them is the recent introduction of a spot BTC exchange-traded fund (ETF). This new avenue for Bitcoin investment introduces a complex layer into the market dynamics, potentially dampening any adverse effects from short-term holders’ profit-taking activities.
Dan concluded by watching:
But considering the BTC spot ETF and potential additional flows from institutions and individuals, it is difficult to judge it simply as a sign of the peak of a bull market. After a period of short-term correction, it is very likely that we will see another strong rally in 2024.
Head of Research at CoinShares, James Butterfill, provides an additional layer of analysis suggesting an imminent “positive demand shock” for Bitcoin. According to Butterfill, the delay in making spot Bitcoin ETFs accessible to the Registered Investment Advisors (RIA) market – an industry that manages around $50 trillion in assets – is about to end.
With RIAs requiring three months of business data Before adding new ETFs to your portfolios, the market is about to witness a substantial influx of new Bitcoin investments. “If 10% of RIAs decided to invest 1% of their portfolios, this could result in approximately $50 billion in additional inflows,” Butterfill elaborated, highlighting the scale of the potential impact on the market.
Furthermore, the current supply and demand dynamics within Bitcoin market is distorted in order to increase demand against decreasing supply.
Daily demand for BTC, fueled by spot BTC ETF trading and average production of new coins, underscores a growing gap that ETF issuers are filling entering the secondary market.
This scenario is evidenced by a dramatic reduction in OTC coin holdings, a direct consequence of ETF-driven demand, according to Butterfill.
Featured image from Unsplash, chart from TradingView
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