The on-chain analyst explained that Bitcoin is currently in a coil spring state where the asset doesn’t usually stay in for very long.
The short-term Bitcoin holder’s sell risk ratio has dropped recently
In Recent post on X, a Checkmate analyst discussed the latest trend occurring in the sell-side risk ratio for short-term Bitcoin holders. The sell-side risk ratio here refers to an indicator that tells us how the absolute profit and loss locked in by investors compares to the realized BTC capitalization.
The realized cap is essentially a measure of the total amount of capital that holders as a whole have used to purchase their coins, as reported on-chain.
Therefore, the sell-side risk ratio, which is a ratio of the sum of the gains and losses associated with that initial investment, provides information about how investors’ realization of gains or losses compares to their cost basis. When the value of the indicator is high, it means that holders are now realizing a vast profit or loss. This tendency may result from the high volatility of the asset’s price.
On the other hand, a low ratio means that investors are only selling coins near their break-even point. This type of trend may suggest that the market recipients of profit or loss have been exhausted.
In the context of the current topic, the sell-side risk factor of the entire market is not of interest, but only of its specific segment: short-term holders (STH). These investors are typically defined as investors who have purchased their coins in the last 155 days.
The chart below shows the data trend for this cohort over the past decade:
As you can see from the chart, the put risk ratio for Bitcoin STH has increased to very high levels as it surged towards a recent all-time high (ATH) earlier this year. Historically, STHs have proven to be fickle market hands that sell easily at the sight of any FOMO or FUD in the sector. Therefore, it is not surprising that these investors increased their profit-taking along with growth.
However, since this peak, the indicator has dropped sharply as the cryptocurrency’s price is stuck in a never-ending consolidation. After falling, the indicator has now returned to a relatively low level.
It appears that as the acute sideways move occurred, STH sellers saw exhaustion. “Bitcoin is coiled like a spring and usually doesn’t stay that way for long,” the analyst notes. Given that the asset price has risen to $71,000 in the last day, it is possible that this deterioration has already occurred.
BTC price
Bitcoin has seen an raise of around 3% in the last 24 hours, which has pushed its price to currently reach $70,900.
Featured image from Dall-E, checkonchain.com, chart from TradingView.com
