The cryptocurrency market is showing signs of renewed vigor as Bitcoin surged past the $30,000 mark on June 21 for the first time in the past two months.
This rally triggered over $228.8 million in short liquidations within 24 hours, with Bitcoin accounting for $110.5 million. Bitcoin’s resurgence over the $30,000 threshold could potentially signal an upcoming rally, a sentiment echoed by on-chain data, particularly the behavior of short-term holders.
Short-term holders (STHs) are investors who have held their crypto assets for less than 155 days. Their behavior is crucial in market analysis as they are susceptible to recent price changes, making them a reliable indicator of market momentum.
CryptoSlate analysis, based on data from Glassnode, found a positive shift in the short-term holder realized profit/loss (STH RPL) ratio, a key metric in understanding market trends.
The STH RPL ratio, along with its one-year moving average, provides a view of periods where the Profit/Loss Ratio is experiencing an acceleration in either direction, thereby aiding in the identification of trend inflection points.
The Profit/Loss ratio is calculated by dividing the value of coins sold at a profit by the value of coins sold at a loss — in this case, within the short-term holding period of 155 days. The metric reflects how STHs respond to recent price changes and shows the current market sentiment among new investors.
STHs are typically active throughout the market cycle and are statistically the most likely to respond to market volatility. Owners of recently transacted or acquired coins are likely to carry a degree of recency bias concerning the coins’ cost basis. Thus, a rising or falling price below that level is more likely to elicit a response.
Around local market extremes, there is often a net transfer of wealth as investors take profits near tops or capitulate near bottoms. This rotation of capital usually leads to an increase in the proportion of wealth held by STHs, making them a primary cohort to observe after these events. Tracking the momentum shifts for STHs realizing profit/loss can signal when macro market trends are at an inflection point.
During market rallies, realized profit accelerates as STHs that acquired coins recently come into profit. Conversely, realized loss accelerates during market corrections, plunging the STHs that recently acquired coins into a loss and creating panic.
Historically, sharp rises in the STH profit/loss ratio momentum have indicated the beginnings of bull rallies, while sharp drops have signaled the onset of bear markets. The recent positive shift in the STH RPL ratio, coupled with Bitcoin’s surge past $30,000, could potentially indicate a new phase of bullish market momentum.
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