Long-term holders of Bitcoin (BTC) are profitable for the first time since May 2022, Blockchain Data shows
Blockchain data shows that long-term owners of bitcoin (BTC) are profitable for the first time in nearly a year. Historically, renewed profitability for long-term owners has heralded major market upswings.
The seven-day average of bitcoin’s long-term holders’ leveraged production profit ratio (LTH-SOPR) has crossed above 1 for the first time since May 2022, according to data tracking firm Glassnode.
SOPR is the ratio in US dollar value of Unspent Transaction Output (UTXO) at creation and the value at which the relevant wallet spends UTXO on chain. UTXO is a transaction output that has not been used as input in a new transaction. You can think of UTXOs as the remaining change in your pocket.
If wallet X sends one bitcoin to wallet Y, it is assumed that the former spends or sells coins to the latter. If the value at which X moved coins to Y was higher than at the time of acquisition, X is said to have realized profit. A SOPR ratio above 1 indicates that coins being moved are, on average, selling at a profit.
The long-term holder SOPR focuses on coins moved on-chain that have a lifetime of at least 155 days.
“The long-term SOPR variant tends to better reflect changes in the macro market. After an extended period of realized losses (LTH-SOPR < 1), the LTH cohort finally returns to a regime of profitable spending, a structure that is again eq. to previous cycle transition points," Glassnode analyst James Check said in the latest edition of the weekly note.
The ratio’s latest move above one comes amid bitcoin’s recovery from the bear market. At today’s price of $29,500, the cryptocurrency is up 90% from the low of $15,460 recorded last November.
The ratio’s previous crossovers dated beyond one — dated May 2020, May 2019 and November 2015 — also coincided with recovery rallies that eventually translated into multi-year bull runs.
The chart shows extreme sub-1 readings have historically marked periods of investor capitulation, which coincided with market bottoms. Meanwhile, values above 10 have signaled a market top.
SOPR above 1 to create resistance
Although the ratio’s crossover above zero may imply a positive market cycle going forward, in the short term it may slow down the cryptocurrency’s growth.
“The LTH cohort currently consists of many 2021-22 cycle holders, many of whom remain underwater and are likely to create resistance throughout the market recovery,” Check noted.
South Korea-based research firm CryptoQuant expressed a similar opinion, saying a return to profitability could inject selling pressure into the market.
“From a chain data perspective, bitcoin’s price could be pushed to the downside by higher spending from whales [large investors] and long-term owners taking profits by the highest margin in nearly a year,” CryptoQuant said in a report shared with CoinDesk.
