Analysis: Bitcoin Short-Term Overheating Signal Suggests Pullback May Be Near

Bitcoin may be nearing a short-term correction as short-term holders increasingly lock in profits, according to a CryptoQuant analysis.

In a report published Aug. 29, CryptoQuant contributor MAC.D wrote that the seven-day moving average of Bitcoin’s short-term holder SOPR, or STH SOPR, has surged to about 1.03. That puts the indicator back at a level that has previously preceded short-term pullbacks.

The short-term holder SOPR measures whether investors who held Bitcoin for a relatively brief period were realizing profits or losses when they moved their coins. A reading above 1 means short-term holders are, on average, moving Bitcoin at a profit, while a reading below 1 indicates they are selling at a loss.

MAC.D viewed the move toward 1.03 as a sign of overheating. In earlier bullish phases, Bitcoin underwent short-term corrections when the short-term holder SOPR reached about 1.03. With the gauge nearing a similar level again, investors should keep the risk of a pullback driven by overheating in mind.

By contrast, a buying opportunity could emerge if the short-term holder SOPR falls below 0.99, he wrote. Rather than chasing Bitcoin at current prices, waiting for STH SOPR to drop back below 1 and for short-term overheating to ease could offer a more attractive entry point.

As of 6:40 p.m., Bitcoin was trading at $77,704, down 2.13% from a day earlier.