The Short-Term Holder Spent Output Profit Ratio (STH-SOPR) is a critical indicator in the blockchain market, helping to determine whether short-term holders are profiting or incurring losses when they spend their Bitcoin. The application of the Bollinger Bands indicator can identify unusual market moments that deviate from the standard distribution.
A breach of the upper band (+2σ) suggests market overheating, while a breach of the lower band (-2σ) can signal a market downturn. The indicator is then expected to revert towards the Bollinger Bands' center.
The analysis reveals that cases exceeding ±2 standard deviations are significant, as is the slope of the median within the Bollinger Bands. A breach of +2 standard deviations could indicate a potential price drop, especially if the moving average band is horizontal or sloping downwards. Conversely, a breach of -2 standard deviations could suggest a potential price rise, particularly if the moving average band is horizontal or sloping upwards.
In conclusion, combining auxiliary indicators with STH-SOPR can assist in identifying short-term market peaks and troughs. However, relying solely on this indicator for investment decisions is not recommended.