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Bitcoin On-Chain Metric Forms Bearish Divergence, Top Here?

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On-chain data shows a Bitcoin indicator has been forming a bearish divergence for a while now, a sign that the top may be close for the asset.

Bitcoin Short-Term Holder SOPR Has Been Moving Opposite To Price Recently

As an analyst in a CryptoQuant Quicktake post, a bearish divergence has been brewing in the Bitcoin short-term holder SOPR recently. The “Spent Output Profit Ratio” (SOPR) indicates whether Bitcoin investors are selling at a profit or at a loss right now.

When the value of this metric is less than 1, it means that the average holder in the sector is transferring their coins on the blockchain at a net amount of loss currently. On the other hand, values under the threshold imply profit-taking is the dominant form of selling among the investors.

The SOPR being equal to 1 suggests the amount of profits being harvested are precisely canceling out the losses in the market, so the holders could be imagined to be just breaking even on their selling.

This indicator can also be defined for only a specific portion of the market, and in the context of the current discussion, that segment is the “short-term holders” (STHs).

The STHs include all the investors who bought their coins within the past 155 days. This cohort is the fickle-minded side of the market, who may sell at the first sight of instability.

Now, here is a chart that shows the trend in the 7-day exponential moving average (EMA) Bitcoin SOPR for these STHs over the past year:

Looks like the 7-day EMA value of the metric has been going down in recent weeks | Source: CryptoQuant

As is visible in the above graph, the quant has highlighted a specific pattern that the Bitcoin price and the 7-day EMA Bitcoin STH SOPR appear to have followed during this period.

It would appear that the metric registering a decline while the price heads up has turned out to be a

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Author: Keshav Verma

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