We’re back with another round of your questions, and this month you have not gone easy on me.

Short-Term Holder SOPR is knocking on 1 for the first time in months, several of you want to know how to tell a real reversal from another bear market trap, and more than a few of you are asking the question I take most seriously: what happens to Bitcoin if the AI trade cracks.

There is an enormous amount to unpack, so let’s get straight into it.

1. Are Holders Actually Capitulating?

Question: Everyone keeps saying “capitulation”, but how do you actually measure whether people are selling at a loss versus just holding and hoping? Is there real capitulation in the data, or not?

My Thoughts: This is where SOPR earns its keep, and it is one of the first charts I pull in a drawdown. SOPR, the Spent Output Profit Ratio, tells us whether the coins moving on-chain each day are being sold at a profit or a loss. When it sits below 1, the average coin changing hands is being realised at a loss, which is the literal on-chain definition of capitulation.

Short-Term Holder SOPR has spent most of this drawdown printing deep below 1, which tells me recent buyers are the ones flushing out and eating painful losses. That is exactly who you want to see capitulate near a bottom, because it transfers coins to stronger hands and cleanses the supply overhang.

Crucially, this needs to get back above 1 for the bull market to resume. STH SOPR has now clawed back to 0.998, so extremely close. It tends to act as resistance in a bear and support in a bull, so do not assume we are out of the woods yet, it could just as easily mark another leg down. But this is certainly what we want to see first for the bleeding to stop.

View live in OCM Studio: STH SOPR

2. A Bottom or THE Bottom?

Question: Say we bounce hard from here. How do you tell the difference between a genuine reversal and just another vicious bear market rally that traps everyone before a new low?

My Thoughts: This is the trap that catches almost everyone in a bear, and I have been snared by it myself in cycles past. 

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