Indicators show Bitcoin profit-taking may be slowing down, despite the top-cryptocurrency dipping below $44,000.
The Sell-Off Slows
According to an analysis conducted by cryptocurrency data analytics firm Glassnode, there are indications that Bitcoin (BTC) investors are slowing profit-taking even with BTC’s dip to $44,000.
Glassnode examined the Spent Output Profit Ratio (SOPR) – a measure of a cryptocurrency market’s overall profit or loss. An SOPR value above one suggests investors are selling a crypto-asset at in profit, and vice versa.
Specifically, it takes the final value of aggregate sales for a specific cryptocurrency and divides it by the aggregate purchase value, giving a profit or loss ratio.
For BTC, the SOPR just went negative for the first time since September last year. This indicates BTC sellers are selling at a loss. Accordingly, one would therefore expect fewer Bitcoin investors to continue selling, so as to wait for a profitable period.
The daily #Bitcoin Spent Output Profit Ratio (SOPR) has seen a full reset, and turned negative for the first time in five months – investors were on average moving BTC at a slight loss, indicating profit-taking has abated.
Chart: https://t.co/Nx2Ulu6AwZ pic.twitter.com/xxwE31aB5k
— glassnode (@glassnode) February 28, 2021
Bitcoin Supply vs Demand
Indeed, the analysis corroborates yesterday’s revelation that BTC miners have begun accumulating rather than selling their mining rewards.
This is potentially due to the fact that total net realized losses for BTC hit a record $243 million on Feb. 27, the aggregate dollar value of the negative SOPR.
Both indicators also suggest the growing Bitcoin supply shortage is set to be further exacerbated, amidst unprecedented levels of demand for the top-cryptocurrency.
In February alone, cryptocurrency fund manager Grayscale Investments bought over $700 million worth of BTC and Ethereum (ETH), as demand from institutional clients continued to balloon.
The fund manager is also pushing ahead with plans to expand its already sizable cryptocurrency fund offering, introducing several other cryptos to its list.
With 20% of all BTC already lost forever, more demand will just send the price higher.
Miners have stopped selling and started accumulating #Bitcoin
Yesterday was the first day since Dec, 27 when Miners Position change turned positive.
Miners were selling their bitcoins for two months.
Bullish. pic.twitter.com/S89iBcz4k3
— Lex Moskovski (@mskvsk) February 27, 2021
Short-Term Woes Persist
Despite the flurry of “bullish” indications in recent days, the cryptocurrency market continues to suffer through a significant sell-off.
At press time, the top-cryptocurrency is hovering just above the $43,000 mark. The total market capitalization in the space has shed over $500 billion in less than a week.
Today, most of the cryptocurrency market, save BTC, is down at least 10%. In that regard, the monthly suggestion that the 30-day BTC futures settlement date is to blame is here again.
Evidence points to an increase in volatility pre-settlement. However, there is no authoritative study yet that finds a significant relationship between the two variables (BTC price and BTC futures settlement date).
Experience puts today’s sell-off down to profit-taking following a rocket-fueled rally. Whatever the cause, demand is still strong, supply short and the data show a slowing of bearish momentum.
Moon? Maybe soon.
