Investors are selling Bitcoin (BTC) for less than they paid for the holdings, despite the fact that Bitcoin (BTC) is still on a bullish rise.
Though naturally, no investor would prefer to sell an asset at a loss, the recent Bitcoin (BTC) decline has prompted a subset of market players to liquidate their holdings seeing as they fear more losses are ahead of them if they decide to stick around and hodl.
Long-term investors often criticize panic selling, claiming that bigger investors that are far more liquid will claim the supply, putting those who sold at a disadvantage.
Decentrader analyst Philip Swift examined the spent profit output ratio (SOPR) indicator and discovered that, though selling remains at a steady low, 2022 has prompted the increase of panic selling.
2/ It's interesting to note that the selling at a loss the past few months has been much more shallow vs. 2018/19 bear market, but much deeper than we saw in either bull run period. Is this a bull or bear market rn? pic.twitter.com/LJQhUkz9eY
— Philip Swift (@PositiveCrypto) January 27, 2022
“SOPR (Spent Output Profit Ratio) has had a consistent patch of on-chain loss selling recently,” said Swift on Twitter.
SOPR examines the aggregate data of price bought compared to price sold for Bitcoin (BTC) over a specific time period to determine whether sellers are incurring gains or losing money.
The psychology of selling at a loss, as highlighted by its author, Renato Shirakashi, implies that only individuals in panic mode will undertake such actions, as such there are grounds for reassurance from January’s shallow selling.
However, Swift still went on to say “it’s interesting to note that the selling at a loss the past few months has been much more shallow vs. 2018/19 bear market, but much deeper than we saw in either bull run period.”
The price movements of Bitcoin (BTC) have been quite surprising, especially considering that since November it has incurred a 50% decline. In this stage of the halving cycle of the biggest cryptocurrency, this decline is atypical as it would have had to be its most bullish stage.
After a year of fast increases, the entire year of 2021 appears to be a consolidation zone. If low-volume retail investors are selling, this would coincide with other on-chain data which would supply transaction coverage.
The preponderance of transactions currently involves huge quantities of $1 million or even larger sums, as Glassnode verified days ago. The on-chain analysis firm found that the primary on-chain force is institutions rather than retail.