• Bitcoin fails to hold above the $27,500 level suggesting that the gates to a downside to $23,000 are still open.
  • The Bitcoin short-term SOPR has once again moved back above 1, hinting that short-term holders are taking profits.

Earlier this week on Monday, May 29, the Bitcoin (BTC) price made a quick surge to over $28,000 after news that the US lawmakers will soon pass a proposal to raise the debt ceiling further. Along with Bitcoin, the broader cryptocurrency market gained traction, however, this remained short-lived as BTC eroded all the 4 percent gains, the day later.

As of press time, Bitcoin is trading 0.64 percent down at a price of $27,754 and a market cap of $538 billion. With Bitcoin not finding enough support to continue the bull run, the probability of the move downside remains open. Popular trader Crypto Tony said that the move to $23,000 is very much possible. In a Twitter message, he wrote: “If we close back below $27,500 I will close my long and look for a short position”.

However, soon after yesterday’s bounce, the short positions started rising again showing that the short-term holders were selling at a profit again. On-chain resource Material Indicators noted:

As someone who frequently uses the phrase #WildWestWeekend in #Crypto, I actually believe the #Bitcoin PA we’ve seen for the past few days is legit for multiple reasons including the fact that the bounce came from key technical support at the 200-Week MA, and the #DebtCeiling deal announcement.

Bitcoin Short-Term Traders Are Selling At Profit

As per the on-chain data, the short-term holders of Bitcoin have been selling at a profit. Blockchain analytics firm Glassnode shows that the seven-day moving average of the short-term holder’s (STH) spent output profit ratio (SOPR) has once again moved back again above 1.

In the weekly newsletter, analysts at Blockware Solutions said:

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After a brief stint of coins moving at a loss, STH-SOPR is now back above 1. This is bullish for near-term price action as it shows capitulation from short-term holders.

As per on-chain analysis, a short-term holder SOPR of more than 1 means that short-term holders are selling their BTC at profits. The SOPR reading above 1 signals signs of capitulation while a reading under 1 shows that the average short-term holder is just breaking even. The short-term SOPR particularly focuses on wallets that have held their BTC for less than 155 days.

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During the bull markets, the STH SOPR has historically stayed above 1. This is because upward price movements enable short-term holders, including new participants, traders, and those with less conviction, to sell their assets at prices higher than what they paid.

Additionally, the level around 1 often serves as a support level during bull runs, as holders view it as an opportunity to buy at a profitable cost basis, anticipating further price increases. Conversely, during bearish trends, level 1 acts as resistance.

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