✒️STH-SOPR (Short-Term Holder Spent Output Profit Ratio) indicates whether short-term holders (STH) are making a profit or a loss when they spend their BTC. By applying the Bollinger Bands indicator, one can capture atypical moments that deviate from the normal standard distribution. If the upper band (+2σ) is breached, it can be seen as market overheating, while breaching the lower band (-2σ) can indicate a market downturn. Subsequently, the indicator is expected to revert towards the center of the Bollinger Bands.
The results show that not only do cases exceeding ±2 standard deviations matter but also the slope of the 🟡median (the central value located within the Bollinger Bands) is significant.
When breaching +2 standard deviations: 📉 Possibility of a price drop 🟡 The reliability increases if the moving average (median) band is horizontal or sloping downwards
When breaching -2 standard deviations: 📈 Possibility of a price rise 🟡 The reliability increases if the moving average (median) band is horizontal or sloping upwards
Thus, combining auxiliary indicators with STH-SOPR can help identify short-term peaks and troughs. However, relying solely on this indicator for investment decisions should be avoided.
Written by Yonsei_dent