Bitcoin Snippet – 25/02/2022

The invasion of Ukraine sparks fear in short-term holders as they sell for losses.

As news came out that Russia invaded Ukraine, we saw short-term Bitcoin holders selling for a loss as markets around the world dropped on the news. We can observe the behaviour of short-term Bitcoin holders by looking at the “short-term holder SOPR metric” or “Spent Out Profit Ratio”.

Short-term holder SOPR is a metric that indicates the aggregate gains and losses realized by short-term holders on a given day. It is calculated by dividing the value at which Bitcoin was sold and the value at which it was bought by short-term holders on a given day.

The metric is considered to be a reflection of the market sentiment or behaviour of short-term holders. Above 1, short-term holders are selling their Bitcoin at a profit and therefore we can infer that market sentiment for short-term holders is bullish and the price of Bitcoin will follow. The opposite is true when short-term holder SOPR falls below 1. That suggests that short-term holders are selling their Bitcoin at a loss and therefore are bearish in the near term.

Yesterday, short-term holder SOPR suggested that short-term holders sold their Bitcoin at a loss as news of Russia’s invasion of Ukraine was announced. In the short term, we can expect short-term bearish price action from Bitcoin as short-term holders continue to sell their Bitcoin at a loss amid fears of the current global crisis we are facing. Yesterday there was a large spike in realized losses of over $1.3bn that can be seen in the chart below.

Nothing in this article constitutes professional and/or financial advice. The content is provided exclusively for informational and/or educational purposes. Nothing is to be construed as an offer or a recommendation to buy or sell any type of asset. Seek independent professional advice in regards to financial, tax, legal and other matters.

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