Bitcoin (BTC) took a dip below the $80,000 mark, unable to hold onto the earlier gains of the day.

According to CryptoSlate data, Bitcoin’s price was at $77,400 at the time of writing, reflecting a 5.84% drop over the last day.

On-chain analysis suggests that recent investors selling at a loss played a role in this price decrease. However, the latest “Bitfinex Alpha” report indicates that the underlying market structure is still in a position for a possible rebound.

Over the past week, BTC has seen a 13% decrease. Adding to this picture, the Spent Output Profit Ratio (SOPR), a crucial tool to understand investor profitability, is signaling capitulation. It has entered its first extended period of losses since October 2024.

Capitulation phase

Essentially, SOPR helps us see if Bitcoin investors are selling for a profit or taking a loss. When it consistently dips below 1 – the break-even point – it’s a sign that a large chunk of the market is selling off their holdings at a loss.

Looking at the last couple of weeks, daily losses have averaged a hefty $818 million. February 28th and March 4th marked the biggest single days of losses in this cycle so far. The only time we saw bigger losses in a single day was on August 5th, 2024, during the yen-carry-trade event, which resulted in $1.34 billion in losses.

The Short-Term Holder (STH) SOPR, which is particularly relevant to those newer to the market, hit its second-lowest point in this cycle at 0.95. This indicates that recent buyers are indeed realizing significant losses.

Historically, when the STH SOPR goes deeply negative like this, it’s often been a sign of capitulation. This is when we see panic selling, which pushes out less resilient investors and opens the door for those with stronger conviction to buy in.

Furthermore, when the SOPR dips below 1, it’s generally a sign of selling driven by losses, a pattern seen during significant market corrections in the past. On the flip side, if we see a quick bounce back from this level, it often suggests that buyers are stepping in to defend prices around their initial investment levels, which can strengthen bullish momentum.

The significant losses we’re seeing suggest that many recent buyers, or short-term holders, have sold off their Bitcoin for less than they paid, giving in to the pressure of falling prices.

Uncertain outcome

Historically, these kinds of capitulation moments often come before the market finds its footing. As the less confident investors sell, it sets the stage for those with a longer-term view to start accumulating again.

The report points out that if the overall bullish trend for Bitcoin is still in place, the SOPR should stabilize above 1. This would signal a period of re-accumulation and a return of investor confidence. However, if the SOPR remains weak and stays near or below 1 for an extended period, it could indicate that there’s still potential for further price drops. This makes the SOPR a crucial metric to keep an eye on in the short term.

Furthermore, Bitfinex analysts highlight that broader economic factors and geopolitical events are still significantly influencing market activity. Looking ahead, they stress that watching for buy-side demand and tracking the flow of funds in and out of Exchange-Traded Funds (ETFs) will be vital in the coming week.

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