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Why Bitcoin Crashed Below $58K? On-Chain Data Tells Us
Bitcoin has seen a dip below the $58,000 level today. Here’s what could be a potential cause, according to on-chain data.
Long-Term Bitcoin Holders Just Made Big Profits
As pointed out by an analyst in a CryptoQuant Quicktake sendLong-term holders of Bitcoin reaped a large amount of profits during the latest price drop.
The on-chain metric of interest here is “Ratio of output spent to profit” (SOPR), which basically indicates whether BTC investors are selling/transferring their coins at a profit or a loss. When the value of this indicator is greater than 1, it means that the holders as a whole are making a net profit from their sale at this time. On the other hand, the metric below this threshold implies the predominance of losses in the market.
In the context of the current topic, the SOPR of a specific segment of the user base is of interest: the long-term holders (LTH). This cohort includes investors who have held their coins for more than 155 days ago. LTHs are considered the firm side of the market, as they rarely sell regardless of what is happening in the broader market. Therefore, the times they do sell can be even more noteworthy.
It would appear that recent Bitcoin market conditions have managed to even out these diamond hands as well, as the chart below for their SOPR suggests.
As can be seen in the chart above, Bitcoin LTH SOPR has seen a high density of spikes above the 1 mark over the past day. This would suggest that these HODLers have moved some coins that had previously generated significant profits.
More specifically, the indicator reached a value above 10 during many of these spikes, implying that this group made profits more than ten times their losses during those trades.
Since the SOPR LTH spikes occurred just before BTC’s drop to levels below $58,000It would seem possible that this drive for profit by these usually determined investors was at least partly to blame for the crash.
Another indicator, the Bitcoin Spent Output Age Bands (SOAB), revealed the breakdown of these LTH transactions.
From the chart, it can be seen that the most active LTH segment during this sell-off was the 5-7 year group, meaning that most of the coins sold were inactive between 5 and 7 years ago.
It’s hard to say why these old entities have suddenly decided to sell after being out for an entire cycle, but if this is the start of a sell-off on their part, then things could get even worse for Bitcoin.
BTC Price
During the last crash, Bitcoin briefly dipped below the $57,000 level, but the asset appears to have recovered somewhat since then, returning to the $57,700 level.
Featured image by Dall-E, CryptoQuant.com, chart by TradingView.com